The growing public outrage towards bankers, evident in the AIG bonus debacle, clearly has banking executives anxious to get out of the government’s back pocket as soon as possible, with Bank of America Corp. (BAC) CEO Ken Lewis telling the Los Angeles Times earlier this week that he intends BofA to begin repayment of government funds as soon as a “stress test” of the bank is complete at the end of next month. “As soon as we think the markets normalize, we would very seriously like to pay it all back,” he told the LA Times, adding that he hopes to have repaid all fund by the end of the fourth quarter of this year. BofA is the third largest recipient of government funds via the Capital Purchase Program–with $45 billion in U.S. aid, only American International Group, Inc. (AIG) ($182.5 billion) and Citigroup Inc. ($50 billion) have received more support. Firms receiving government aid are subject to strict executive compensation restrictions, and a growing fear of changing standards over how much freedom firms have to manage their businesses. Goldman Sachs (GS) confirmed Wednesday as well that it planned to pay its entire $10 billion TARP stake back, possibly by the end of April, following the disclosure of “stress test” results. But Lewis’ pronouncement comes as analysts at Moody’s Investors Service downgraded the bank on Wednesday afternoon, suggesting that the likelihood of further government support at the North Carolina-based bank was highly likely — implying a low probability that BofA would also be able to pay off its existing TARP stake. Paul Miller of Friedman, Billings, Ramsey & Co. has been a vocal critic of both Lewis and BofA, and in January suggested that the bank needed $80 billion in fresh capital to support tangible assets. He told the LA Times Wednesday that “I think the regulators will not allow him to pay back the capital given the expected losses coming from his balance sheet.” Lewis and other major bank executives are slated to meet with President Obama in Washington Friday. See separate story. Write to Paul Jackson at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
Most Popular Articles
The housing market is signaling there will be an economic recession by the 2020 election, according to Benn Steil, director of international economics at the Council on Foreign Relations.
Sen. Elizabeth Warren entered Tuesday night’s debate as the new frontrunner, but many in the mortgage industry believe Warren’s ascent is anything but good news. Unlike the average American, who has likely never heard of the Consumer Financial Protection Bureau (CFPB), those in financial fields view what Warren sees as her crowning achievement as something that could cripple the housing market and larger U.S. economy.