Bank of America needs another $34 Billion.

[rafterman]

Damn, where's that going to come from?

http://beta.theglobeandmail.com/glo...-34-billion-in-capital-source/article1129677/

KAREY WUTKOWSKI AND JONATHAN STEMPEL

WASHINGTON and NEW YORK — Reuters, Wednesday, May. 06, 2009 08:31AM EDT

Bank of America Corp. BAC-N has been deemed to need as much as $34-billion (U.S.) in additional capital, according to the results of a government stress test, a source familiar with the results said late Tuesday.

Bank of America spokesman Scott Silvestri declined comment.

A possible $34-billion capital shortfall is certain to increase the pressure on chief executive Kenneth Lewis, whom shareholders ousted as chairman of the largest U.S. bank last week.

The ouster could lay the groundwork for his eventual departure from the company he worked at for 40 years, including the last eight as CEO.

It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.

U.S. equity market futures extended losses late on Wednesday and the yen gained following the news.

About 10 of the 19 banks being stress-tested are expected to need more capital buffers, a person familiar with the official talks has said. The person was not authorized to speak because the results are not public.

Many analysts have speculated that other banking companies that may need more capital, either because they do not have enough tangible common equity or are experiencing rising loan losses, include Citigroup Inc., Wells Fargo & Co., Fifth Third Bancorp, GMAC LLC, KeyCorp, Regions Financial Corp. and SunTrust Banks Inc.

The government has spent three months conducting stress tests on the 19 largest U.S. banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists expect.

Officials plan to release results of the tests on late Thursday, and are expected to reveal both aggregate and individual banks' figures.

Bank of America has been at the top of the list of banks believed to need more capital, as it is facing significant credit losses and a controversial takeover of Merrill Lynch & Co., which closed on Jan. 1.

The $34-billion figure more than triples previously published reports of Bank of America's capital needs.

Mr. Lewis had told analysts on an April 20 conference call that “we absolutely don't think we need additional capital,” but added that credit conditions remained weak, especially in credit cards. “Make no doubt about it, credit is bad, and we believe credit is going to get worse,” he said.

Bank of America that day reported a surprisingly large first-quarter profit, but much of the amount came from one-tine gains and an accounting change, which may not be repeated. The bank's nonperforming assets surged 41 per cent in the quarter to $25.74-billion.

The Federal Reserve and U.S. Treasury declined comment.

Meanwhile, Citigroup Inc. may have to raise $5-billion to $10-billion in new capital, the New York Times said, citing people familiar with the matter. The U.S. government told Citigroup that it would need $50-billion to $55-billion in capital, according to the results of government stress tests of banks, the newspaper said.

The New York bank can easily cover any shortfall and is considering several options to close that gap, the paper cited Citigroup executives as saying.

Most of the 19 U.S. banks being stress-tested intend to hold press conferences on Friday to explain the results of the government's assessments, a source briefed on the plans said on Tuesday, adding that many of the banks are in the process of crafting capital recovery plans.

It is not clear how Bank of America plans to raise the additional capital buffer.

Federal Reserve chairman Ben Bernanke said on Tuesday that most of the capital-needy banks will be able to raise additional capital through “either issuance of new capital or through conversions and exchanges, or the sales of assets and other measures that would raise capital.”

Bank of America has received $45-billion of taxpayer money, including an emergency federal bailout that included $20-billion of new capital in mid-January, two weeks after the Merrill purchase.

Critics believe Mr. Lewis overpaid when he acquired Merrill for about $29.1-billion of common and preferred stock, agreeing to the takeover after less than 48 hours of negotiations and due diligence. Through Tuesday, shares of Bank of America had fallen 68 per cent since the Merrill purchase was announced last Sept. 15.

They also fault him for failing to back away from the purchase after realizing in December that Merrill's finances were deteriorating fast, ultimately resulting in a $15.84-billion fourth-quarter loss.

Critics accuse Mr. Lewis of improperly failing to disclose Merrill's losses, and also for allowing Merrill to pay some $3.6-billion of bonuses to its own workers even as losses were mounting.

Mr. Lewis has said under testimony he felt pressure from officials including Mr. Bernanke and former Treasury Secretary Henry Paulson to close the merger, so as to not upset the financial system. This, however, prompted criticism from law professors and governance experts who said Mr. Lewis owed a fiduciary duty to his shareholders, not his regulators.

Mr. Bernanke on Tuesday told lawmakers he did not pressure Mr. Lewis to withhold information from shareholders about problems at Merrill.

Bank of America is more heavily exposed to the U.S. economy than JPMorgan Chase & Co. and Citigroup, which are better diversified internationally. Analysts widely believe the government will not require JPMorgan to raise more capital.

 

[Malibook]

Apparently this is good news as BAC shares are up around 10% today.

I must give the government some credit.
I thought these tests would be rigged to show that all is fine and dandy.

 

[landscaper]

Apparently this is good news as BAC shares are up around 10% today.

I must give the government some credit.
I thought these tests would be rigged to show that all is fine and dandy.

To many insiders with axes to grind to try and fake these things up. An interesting note in that the columnist thinks wells fargo is on the needy list, last week on of its largest shareholders was of the opinioon that the bank would deal with everything just fine. Now I would tend to give Warren Buffet the benifit of the doubt over the govt everytime.

 

[Rockslinger]

The capital requirements for Citigroup bandied around in the article range from $5B to $55B. Why such a big range?

 

[enduser1]

I notice that they refer to it as a "capital Cushion". Some Cushion!!!!!

 

[nottyboi]

there is 100 bn left in TARP, so there is money for this, but I am just astounded at how any news seems to have a positive spin. It is like the market is on ecstasy.

 

[Rockslinger]

I am just astounded at how any news seems to have a positive spin. It is like the market is on ecstasy.

You know the bear is dead when the market goes up on bad news. Remember when you first met your GF and you ignored all her imperfects?

 

[Malibook]

You know the bear is dead when the market goes up on bad news.

This latest rally could run longer and higher than most expect but this bear is far from dead.

 

[BottomsUp]

Trying to figure out which way the market is going to go or whether its a bull market or a bear market bounce, is totally useless. Experts don't know, so why would amateurs like us know. Just go with the flow. When the market's strong, jump on baord and enjoy the ride, but be prepared to exit when fear takes control. The good news is you have a 50% chance of being right. Its either going up or down.

 

[pokergod]

bank of america and citigroup up 15 percent, go figure

 

[Rockslinger]

bank of america and citigroup up 15 percent, go figure

Are they getting closer to their 2007 price levels?

 

[BottomsUp]

Are they getting closer to their 2007 price levels?

Nowhere near

 

[WoodPeckr]

They are the friggin' Banksters who shuffle paper!
They get whatever they want!

Now if they were Automakers, that ACTUALLY PRODUCE THINGS folks use every day, they would of been allowed to go into bankruptcy!...

 

[JohnLarue]

There is a huge difference
1, The banks are absolutely 100% essential to the economy. The automakers are not

2. The consequences of multiple bank failures is catastrophic. The consequences of the automakers failure is not great but not catastrophic

3. The probability of the govt recouping its investment $ from the banks is pretty strong.
The probability of the govt recouping its loan $ from the automakers is about the same probability of you agreeing the banks should get the $ and the auto unions should not. (i.e pretty close to zero)

 

[WoodPeckr]

LOL!
Knew that remark would flush that paper shufflin' beaner Johnny out of his cubicle...

 

[JohnLarue]

You insist that you have me pegged, but you really do not have a clue
No matter

I noticed you avoided the clear cut logic of my post & choose to attack the author rather than make a sound logic argument either
i) defending the honour of your beloved (soon to RIP) auto industry or
ii) attacking the evil and sinister men in suits

I will just assume deep down you know the money went where it was most important
$ to the banks may appear immoral, but it was the right thing to do for the economy
$ to the auto industry may look like the right thing to do , but it was a waste & more $ would be a bigger waste

 

[WoodPeckr]

At least the Automakers fired their inept CEOs.
The same didn't happen to the Banksters.
Most of those thieves are still in place farking things up...

And sucking up even more of my hard earned tax dollar, with nary a peep about this from you....

 

[pokergod]

japan stocks market up 400 points due to the US streat test news and job loss report

 

[JohnLarue]

At least the Automakers fired their inept CEOs.
The same didn't happen to the Banksters.
Most of those thieves are still in place farking things up...

And sucking up even more of my hard earned tax dollar, with nary a peep about this from you....

I never claimed it was a perfect situation.
Don't worry , you will get your scalps
Lewis has a bullseye on his back & there will be more.

If suits have broken laws they will be prosecuted,
If they acted foolishly they will probably get canned by their shareholders

Finding specific people to blame & hoping they get taken down is not productive, so I do not stay up all night surfing the net looking for targets.

I certainly am not going to develop an ulcer, if Ken Lewis or some other CEO does not get the Axe.

Back to the point
Banks >>>>>> Critical for the economy
Automakers>>>Not so much

You will probably get most of your tax dollars back from the banks (maybe even turn a profit)

That was not going to happen with the automakers (ever), so think of it as the better investment of your $ by your govt

Any of this logic sinking in?
Or is your judgement still clouded by your outrage?

 

[WoodPeckr]

Guess in the final analysis I'm just more of an old fashioned Law & Order type than you!...
I want the bastards hung for all the lives/families they destroyed.
While you appear not all that concerned and seem willing to let them slide....