Does Anyone Have $34 Billion For Bank Of America?
Kenneth Lewis is probably having a pretty crappy day. The government just told him that he needs to find $33.9 billion in order to "withstand any worsening of the economic downturn." Anybody got any spare change?
The NYT explains:
If the bank is unable to raise the capital cushion by selling assets or stock, it would have to rely on the government, which has provided $45 billion in capital through the Troubled Asset Relief Program.
It could satisfy regulators' demands simply by converting non-voting preferred shares it gave the government in return for the capital, into common stock.
But that would make the government one of the bank's largest shareholders.
Lewis is having a difficult few weeks, having recently been fired from his position as chairman of the board. He remains CEO.
Bank of America Needs $33.9 Billion Cushion, U.S. Says [NYT]
(Photo:frankieleon)
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Uh, hey, just so you catch up - the 35 billion doesn't need to be "new" capital. It simply needs to be tangible common equity. You can generate TCE in many ways without raising it from the government or diluting shareholders. That's why the stock is up - 35B isn't much of a hill to climb with as many saleable "intangible" assets and as much preferred equity. There is absolutely no indication that the government will need to provide any funding to BAC.
their stock is up 12% currently!!!!
They know something that we dont. Maybe they know they can handle it. BUY NOW BUY NOW ::presses horns:: :: punches a baby:: [/cramer]
In other news, all of BoA's credit card holders saw a 1% increase in their interest rates across the board.....
Surprised that's not their answer.
I love the loan-sharky-ness the government is exuding lately. I'm having trouble scanning the constitution for any mention of federal "vig" but I assume it's in there.
Why did Comcast beat this company to go to the final round?
Maybe they should start using "Keep the Change".
I have an idea to save the taxpayers a few bucks. Tell Lewis and all of the other highly paid bigwigs responsible for their assets being troubled that they can work for nothing and turn a profit or go to jail. No bonuses, no incentives, nothing. They can start being paid again after all of the taxpayer money has been repaid. Nice thought anyway...
@Shoelace:
Banks aren't allowed to repay the bailout money for fear of creating systemic risk.
But that's an interesting plan. You should read The Gulag Archipelago - there should be boatloads of interesting ideas for you in there.
@menty666: raising interest rates doesn't increase capital. it does increase profitability, which over time can increase capital if the profit is folded into capital reserves instead of doling out dividends or paying bonuses to execs. increasing fee income (a/k/a non-interest income).
slashing credit lines, however, would increase capital (or rather decrease the need for it), by decreasing their exposure to risk. one thing regulators use to determine a bank's "soundness" is something called a capital adequacy ratio (CAR). there are a few different ways to calculate capital adequacy, but the simplest definition of the concept is the ratio of capital to risk (CAR = capital/risk), where "risk" is can be a slew of things (such as outstanding credit card balances, or amount of available credit of one or more group(s) of customers.
regardless, rest assured that BOA will be doing all 3 (increasing rates, charging more fees & slashing credit lines).
Just effing die already.
@mac-phisto: 1st paragraph should end: "increasing fee income (a/k/a non-interest income)"...also =/= raising capital.
Why yes! I can help out poor ol' Bank of America! Here--just raise my credit card interest rate AGAIN.
I don't understand why everyone WANTS Bank of America to fail. Do you think that'll make things BETTER?
Yet according to the wisdom of crowds, Comcast is more evil.
Sigh.
@tekkierich: I'm pretty sure that somewhere in there, they mention something about Congress passing new laws and the courts adjucating them.
@Trai_Dep:
That would be Article I section 8 which clearly outlines the powers that Congress does have. [www.usconstitution.net]
Article III mentions nothing about courts adjudicating laws, only crimes. [www.usconstitution.net]
How's that Countrywide merger working for you?
@theblackdog: Clearly there are more Comcast customers in Consumerist's community than BoA customers.
Bastards, charging me $200 for "Triple Play" and throttling my Internet...*shakes fist*
maybe they shoulda hid more $$ overseas. :/
Why- it so happens that's the EXACT amount of the prize money for winnning "Worst Corporation in America"-- oooohhh--- of course, we have that 34 billion dollar "contest processing fee" we have to charge them (you know, federal regulators), so I guess they get...
nothing.
This explains my $35,000 late charge. DAMN!
I just received a letter yesterday from BOA yesterday that the following changes serve as amendments to my credit card.
Transaction Fee: Were adding or increasing certain transaction fees associated with your account. (that's a shock) But they were nice enough to send me an attached letter with my Billing Rights Statement. What rights???
Put it where the sun don't shine BOA. Screw you Lewis
So what if all the BoA CC holders just quit paying there monthly payments? Is that a stress this test was checking to see if they can handle?
Well, I'm happy to say I contributed to their problem by moving my credit card balance from their 28.5% jacked up from 10.7% for no reason card to my 7.9% card.
Rapacious Bastards.
@EdnaLegume: trust me, you're not alone. i've had 3 credit lines slashed in the last 6 months.
the most surprising was my newegg card (thru CIT bank's "bill me later" program). they cut my limit down to a point where i wouldn't even be able to buy the tv package i bought 4Q 2008 with it.
good credit, bad credit - it doesn't matter anymore. everyone loses.
The govt wont let banks repay tarp if the govt feels they need to raise capital. If they dont reaise capital govt will force banks to take more govt money. Let the banks pay the loan and force them to take the money later if its really needed. All this tarp crap is just the govt trying to get their hands on the banks so they can force more crap down our throats. There should be no such thing as to big to fail or too small to save if you can't make it you can't make it. Damn I should have been a talking head.
@tekkierich: If you're going to refer to the Constitution you might want to study some law as well. The Constitution is a foundation, not a legal code. We have a thing called Judicial Review: it was established in the landmark case Marbury v. Madison (1803) and has evolved since then. [en.wikipedia.org]
@Kaellorian: It's nothing serious. The government is just charging a nominal fee for the convenience of allowing BofA to overdraft their accounts when necessary.
@shiwsup: I am very aware of Madison. I was just noting that it was not in the Constitution.
Federal officials from all branches take an oath to preserve, protect and defend the Constitution of the United States. However you will find congressmen voting for legislation even when they acknowledge portions being blatantly unconstitutional. They say "leave it for the courts to decide."
You do not need to be a scholar to read the thing. Even for its 220 years it is very easy to read. All "legal codes" must adhere to the Constitution, and this should be the first consideration before passing them, not the last.
Just shut them down. They are only the worst bank and most predatory lender (just short of the payday scum) in the entire country.
Please just die already BOA