WORLD> America
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WORLD> America
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Source: Bank of America to need $34B in capital
(Agencies)
Updated: 2009-05-06 22:38 Capital raising It's unclear how Bank of America might raise necessary capital, including whether it does so by selling assets or by issuing more common stock. The bank has said it may sell its First Republic Bank business. It also could sell some or all of its holdings in China Construction Bank, China's No.2 lender.
J. Steele Alphin, the bank's chief administrative officer, told The New York Times that Bank of America would have plenty of options to raise capital on its own before it would have to convert any of the government investment into common stock. "We're not happy about it because it's still a big number," Alphin said. "We think it should be a bit less at the end of the day." 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." Bank of America has received $45 billion of taxpayer money, including an emergency federal bailout that involved a $20 billion infusion in mid-January, two weeks after the Merrill purchase. Critics believe Lewis overpaid when he bought 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, BofA shares had fallen 68 percent since the Merrill purchase was announced on September 15. Lewis is also criticized 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 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 staff even as losses were mounting. Lewis has said under testimony he felt pressure from officials including Bernanke and former US 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 Lewis owed a fiduciary duty to his shareholders, not his regulators. Bernanke on Tuesday told lawmakers he did not pressure Lewis to withhold information from shareholders about problems at Merrill. Bank of America is more heavily exposed to the US 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.
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