Bank Of America To Repay TARP, Greg Curl Allegedly New CEO

Tyler Durden's picture

In addition to paying back its $45 billion portion of TARP, the Bank, in what will be Ken Lewis' last act, will also raise incremental capital. So far in the after house session, the stock is not liking the news very much. In other news, Greg Curl, Chief Risk Officer, is presumably the new CEO although reports so far are conflicted. And even as the firm is set to payout humongous bonuses ala Goldman, the firm will not touch its $44.5 billion in TLGP backed issues.

CHARLOTTE, N.C., Nov. 2 -- 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."

So far this year, Bank of America
has extended more than $12 billion in credit to small-business
customers and assisted more than 49,000 small business card clients in
improving their cash flows by modifying their payment structures.

The repayment of TARP is the latest
in a series of actions taken to reduce Bank of America's reliance on
government assistance. Other actions include:

  • Paying the U.S.
    government $425 million to terminate a term sheet that would have
    guaranteed up to $118 billion in assets, if a final agreement had been
  • Opting out of the Temporary Liquidity Guarantee Program (TLGP) in September.
  • Exiting the Term Auction Facility (TAF) in the summer of 2009.
  • Eliminating
    borrowings from the Federal Reserve's Term Securities Lending Facility
    (TSLF) and Primary Dealer Credit Facility (PDCF).
  • Announcing plans to exit the Transaction Account Guarantee Program (TAGP) effective Jan. 1, 2010.
  • Increasing Tier 1 Common capital by approximately $40 billion in the second quarter of 2009.
  • Issuing more than $10 billion in non-government-backed debt in the public markets in 2009.

terms of the authorization from the U.S. Treasury and banking
regulators to repay the $45 billion investment made under TARP, Bank of
America will repurchase all 600,000 shares of the company's Fixed Rate
Cumulative Perpetual Preferred Stock, Series N; all 400,000 shares of
the company's Fixed Rate Cumulative Perpetual Preferred Stock, Series
Q; and all 800,000 shares of the company's Fixed Rate Cumulative
Perpetual Preferred Stock, Series R. The shares were issued to the U.S.
Treasury as part of TARP. Bank of America is not exercising its right
to repurchase the related warrants at this time.

Bank of America plans to repay the
$45 billion in TARP funds using $26.2 billion in excess liquidity and
$18.8 billion in proceeds from the sale of "common equivalent
securities." Shareholders
would be asked at a special meeting to be held within 105 days of
issuance to approve an increase in the authorized shares outstanding in
order to allow the "common equivalent securities" to be converted into
common stock. The "common equivalent securities" carry warrants to buy
a total of 60 million shares of common stock at $0.01 per share and
other benefits if shareholders do not approve an increase in authorized
common shares.

In addition, Bank of America agreed
to increase equity by $4 billion through asset sales to be approved by
the Board of Governors of the Federal Reserve and contracted for by
June 30, 2010. To the extent those asset sales are not completed by the
end of 2010, the company agreed it would raise a commensurate amount of
common equity.

Bank of America also agreed to
raise up to approximately $1.7 billion through the issuance of
restricted stock in lieu of a portion of incentive cash compensation to
certain Bank of America associates as part of their normal year-end
incentive payments. Year-end incentive payments are dependent on the
performance of the company, business units and individuals and have not
yet been determined. This initiative also aligns associate interests
with the company's performance.

After the TARP repayment and these
initiatives, the company's Tier 1 Capital ratio would be 11.0 percent,
pro forma based on the September 30, 2009 ratio of 12.5 percent. The
Tier 1 Common capital ratio would be 8.5 percent, pro forma based on
the September 30, 2009 ratio of 7.3 percent. The company will continue
to have strong liquidity.

Repurchase of TARP preferred stock
is expected to reduce income available to common shareholders in the
fourth quarter by $4.1 billion, as the book value of the preferred is
less than the amount paid.

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Icarus's picture

2 words.  Golden parachute.

Unscarred's picture

2 more words.  Golden shower.

phaesed's picture

HOLY SHIT! Listen to Dan DiMicco on Fast Money!


He is laying down the TRUTH! What's even funnier is that Melissa Lee thought she was offscreen while she silently lipped "He's on too long! CUT HIM OFF"

phaesed's picture

He basically tore into any upgrade of the steel sector issued by Goldman where he said "Well, I won't comment on what any particular analyst says up there, sometimes it makes sense, sometimes it doesn't". He then tore into the fact that there was no actual stimulus out there, demand is up overseas, but they have trade barriers which makes it hard to actually export anything, but in Europe, America... there's nothing.

Look at 6:00 to watch the bitchiness.

Cursive's picture

Thanks, phaesed.  I guess actual adult talk is not good TV for MeLe.  Next time, the adults should ask her to leave the room before they start.

Divided States of America's picture

Repaying TARP means selling out of overpriced stocks and having no more taxpayer money to play with.

omi's picture

Since taxpayer is broke, there's no such thing as taxpayer money. It's just an imaginary concept.

Anonymous's picture

All imaginary. Confidence building 101. No money was ever transferred. Even our soon to be ex-Chairman Ben said during the Congressional Inquisition it was holding reserves for the bank... The Congressional Inquisition, part of the exercise.

The losses will be transferred to the stockholders, customers of the bank, and the IRS will get much less revenue.

Cursive's picture

It's definitely a topping sign.  There is a blinking sell sign over this market.  Pigs get fat and hogs get slaughtered.

Anonymous's picture

Have to do one will take the CEO job with the Pay Czar's directive of paying everyone less than Robert Gibbs.

deadhead's picture

it was down but momos just goosed it up.


1. dilute common stock.

2. tell everybody this is a great thing.

3. continue fraudulent fasb 157

4. ssshhhhh....don't tell them about q1 intro of off balance sheet 166,167


Rainman's picture

Funny, DH. Methinx #4 would fukk up the payback party real good. But that's next year's problem. Kenny will be in a sunny place by then.   

deadhead's picture

in a logical world that used real accounting, I would agree with you rainman.

however, my conclusion is this:

1. Fed, Treasury, FDIC, OTC, OCC etc have all decided that the rule of law means little ergo "prompt and corrective" actions towards failed institutions is last on the list.

2. The FDIC has closed the comment period for input on capital requirement matters that are affected by this action.  I don't know when they will release their decision (probably on Thurs December 24th at 9:00 p.m. Eastern, or later).

3. The decision will certainly be to ease in increased capital over a period of X years...... X will probably be 3 or 4 centuries.

4. None of the capital increases necessary in a sane world would matter anyways as the FASB 157 mark to "model" numbers can be adjusted and they will probably find a way to value this incoming tsunami of shit stained toilet paper at one hundred cents on the dollar.

5. In addition to having been on the goldman CONviction buy list for quite some time, BAC has been reiterated twice (that I know of), the most recent being earlier this week, Monday I think.

6. Every phucking bank and brokerage shop will be asked by the Fed to create a new sell side analyst category called "you must buy this bank stock or you will immediately contract terminal cancer and all of your loved ones will die as well" and BAC will be the first bank rated as such.  Naturally, WFC will follow in about 2 hrs and then we will get to some of our finer regional banking institutions. 

Cursive's picture


Line of the year!

"it was down but momos just goosed it up."

Put that in the time capsule.

SDRII's picture

"common equivilant" sounds a lot like the bankrupt UK "innovation" of hybrid convertable trigger notes. the UK has beocme the toxic testing ground for everything Fed. sad commentary on state of things

deadhead's picture

got bac up right now 3.77%


Anonymous's picture

On track to reach $32 next year?

bugs_'s picture

They might need the $45B for Sheila.

Screwball's picture

Gasbagarino told the desk they didn't want to put up with Barney Fwank every five minutes.  Bullshit, Charlie.  Barney might be a crank when we see him, but he sure as hell doesn't tell the banks what to do.  Quite the other way around.  And we all know what Barney does behind closed doors.  Charlie, ya dumb ass.

Rainman's picture

BAC ain't paying back nobody nuthin' til the securities offering is complete. could drive a bus through that timing loophole.

Meanwhile, this news will be a big help for Kenny as his legal issues loom large.

deadhead's picture

I would venture a guess that Judge Rakoff would disagree with you last sentence.

deadhead's picture

momos dropping her back down, now up 3%.

best line from the BAC press release is saved for last:

Repurchase of TARP preferred stock is expected to reduce income available to common shareholders in the fourth quarter by $4.1 billion, as the book value of the preferred is less than the amount paid.

Cursive's picture

Am I reading this to say that the $45B "invested" is only worth $4.1B now?  Is that right?

evanesce's picture

I cannot imagine a better cover story for Goldman's pending bonuses. If BAC can repay TARP, then all is well in the US financial sector; ergo, GS is simply rewarding its excellent employees for jobs well done. The party continues. (And, of course those assets that were so troubled they needed to be off-loaded have magically healed themselves and won't be a problem anymore. Sigh.)


Tyler, any info on who's underwriting the secondary?

lizzy36's picture

paulson participating in the securities offering (pref deal)?

deadhead's picture

down to plus 1.6% then just bounced up to plus 2.%

what a deal...get 'em while they're hot!

Rollerball's picture

They'd better hire some IT pros.  I have it on good information that BOA was systemically down area-wide in Jacksonville, FL today.  Wouldn't bank.

sysin3's picture

hell, that's only1/8 dilution.

BAC gonna be $25 tomorrow.

All you morons who can actually do math will be confused, disappointed and nonplussed.

It's the new math, don't ya know.

Dixie Normous's picture

Wouldn't it be funny if this caused a huge rally in the dollar and sell off in stocks.

Anonymous's picture

bac 3.00 to 19.00, dump stock on joe public to repay 45billion in tarp funds

fasb 166/167 jan 1 2010

joe public gets roasted.

bac back to 3.00

chindit13's picture

When the primary motivation for paying back $45 billion in TARP funds---in a bank holding 11% of total US bank system deposits, and which will require additional dilution in what is already a heavily diluted stock---is so that you can "legally" afford to hire a new CEO possessed of more knowledge and gravitas than a teller at a strip mall branch, you can rest assured the best interests of the economy and the shareholders are foremost in the minds of management.

Why not just get it over with and name John Paulson with the proviso he can keep his current day job?

Anonymous's picture

conclusion is always same... render society poorer on the whole...

for us, it will become a genuine tragedy...

Hondo's picture

What has the dilution been in this stock..........

Anonymous's picture

We need a professional analysis of this announcement.Is't the bank effectively helping itself to depositors money by loaning itself $26 bil(and change) from "excess reserve"?. And if they had a m2m accounting,wouldn't that excess reserve be underneath what is requred from them to keep in the first place?. So in essence,arn't they are stealing customer's deposits,hoping that they won't have to face a situation where they are forced to come up with those deposits for now?.

Anonymous's picture

How much money dit BoA made with the 911 crash?

How much will it make with this one?

A most see video: the ring of power!

Jus7tme's picture

Someone please explain the following:

Durden says:

>>And even as the firm is set to payout humongous bonuses ala Goldman, the firm will not touch its $44.5 billion in TLGP backed issues.

BofA Press release says:

>>Opting out of the Temporary Liquidity Guarantee Program (TLGP) in September.

Now, I do not what the definition of the word "touch" is, but it sounds like BofA is claiming they paid TLGP back, and Durden says they did NOT.

Who is is correct, and does TARP not stipulate that TARP must be the *last* loan paid back among all the public loans made to the banks? (the latter question you may consider to be a rhetorical one).

What happened to the Sheila Bair proposal that banks could not pay out bonuses until they  had stopped utilizing FDIC-backed loan guarantees?