Small Us Banks Fear Bail-outs Will Be Used to Take Them Over

America's smaller banks have objected that they could be vulnerable to government-funded predatory takeovers as their larger rivals enjoy huge cash injections from a $250bn (£160bn) treasury bail-out.

The list of US banks signing up for government capital swelled to at least 19 yesterday as middle-ranking names including State Street, Capital One and SunTrust announced they were issuing shares to the treasury in return for $17bn.

Critics have questioned whether the funds will be put to good use. Lending remains sparse on the high street and there are fears that the recipients will simply hoard the money - or use it to buy smaller players. Camden Fine, chief executive of the Independent Community Bankers of America, said: "These taxpayer funds are intended to unfreeze the credit markets and to open up local economies - not to help investors in one bank buy out investors in another."

The latest group of recipients for state hand-outs includes regional players such as First Niagara Financial in upstate New York, Ohio-based Huntington Bancshares and Chicago's Northern Trust.

They join the nine top banks such as Citigroup, Goldman Sachs, Morgan Stanley and Bank of America originally named by the Treasury as beneficiaries of the recapitalization program .

A Californian lender, City National Bank of Beverly Hills, made it clear that it would consider using its $395m capital infusion to make purchases. The pace of deals in the banking industry has picked up. On Friday, Cleveland-based National City Bank agreed to a $5.6bn buyout by a competitor, PNC, which is getting $7.7bn from the Treasury.

There is speculation that aid could be stretched to troubled insurers and to struggling car makers such as Ford and General Motors. The assistant US treasury secretary, David Nason, said: "There are a lot of industries saying they need federal assistance so we're willing to listen."