Breaking: Bank of America is Actually Going to Pay Back TARP. For Real This Time
What's the deal, Treasury?
Via Charlotte Observer (November 24):
Of all of Bank of America's problems, paying back the government's $45 billion loan is perhaps the most consequential.
The bank is eager to free itself from the aid, which came from the government's Troubled Asset Relief Program, and all the strings that are attached. But it's not clear when the government will grant permission.
"We are ready and able to repay TARP," bank spokesman Scott Silvestri said this week. But the bank is "waiting for the government to establish the appropriate time," he said.
This month, the federal government asked the largest banks that still hold TARP, including Bank of America, to submit their plans for how and when they expect to repay the money. The banks will have to show that they can raise money from private investors - in other words, without government backing. They'll also have to show that, even without the TARP money, they would still meet stringent capital requirements that the government put in place after stress tests in the spring.
Analyst John McDonald wrote recently that "based on the numbers alone," Bank of America should be able to repay TARP immediately: In the second quarter, it more than met the stress test mandates by raising $40 billion, which was $6 billion more than the government required. Also, in recent months, it issued $10 billion in debt without government backing, and it has stopped borrowing from two Federal Reserve programs.
This goes alllll the way back to March when BofA said they were ready to pay. Still ready, BAC? Sure about that? Think about your answer for a few moments before you speak, please.
Guess what? As of moments ago, they ARE repaying the shit. $45 billion is fabulous for Timmy's little pay down the deficit plan, only $11.5 trillion to go!
CHARLOTTE, N.C., Nov. 2 /PRNewswire/ -- Bank of America today announced that it will repay U.S. taxpayers their entire $45 billion investment provided under the Troubled Asset Relief Program (TARP). The repayment will be made after the completion of a securities offering (see below).
To date, Bank of America has paid $2.54 billion in dividends to the U.S. Treasury on the TARP investment. Repaying TARP will save the company approximately $3.6 billion in annual dividend costs from the TARP investment.
"We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest," said Kenneth D. Lewis, chief executive officer and president. "As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfill that commitment while continuing to lend. We believe that this is good news, not only for the U.S. taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover.
"Adding TARP to our capital has allowed Bank of America to continue to support the economy. In the 12 months since the government first made its investment in Bank of America, our company originated $760 billion in new credit, or approximately $3 billion per business day," Lewis added. "Importantly, this includes our leadership role in financing home ownership, helping more than 1.54 million customers purchase a new home or refinance their existing mortgages and another 423,000 homeowners modify their loans to avoid foreclosure."
Good job, Bank of America, now how's that search for a CEO going?