Bank of America

First dumb taxpayers, now even dumber investors: your money is much appreciated. In other news: use of proceeds - meet black hole. Black hole - meet use of proceeds.

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. $18.8 billion of new "common equivalent securities" to be issued, or the equivalent of 1.2 billion shares. 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.

Earlier we presented one view on why gold is about to plunge. While that perspective was somewhat truncated, a report recently issued by Bank Of America's commodities team presents the case for gold at $1,500/ounce. As BACMLCFC observes, and agrees with other observations presented on Zero Hedge by both SocGen and by Jim Grant, "[d]uring the last decade we found that three variables alone could explain the fluctuations in the price of gold: risk, currency and commodity prices. In a nutshell, our analysis showed that gold is sometimes a currency, sometimes a commodity and sometimes a store of value. Of course, the elusive question will always be figuring out which market gold will track next." In essence, a detailed if longwinded report (get a cup of coffee now) to confirm that Paulson and Ackman will soon be much richer.

The latest Paulson & Co. 13F is out: the man who inspires a million hedge fund clone portfolios has made some interesting changes to his holdings. The most notable is the documented addition of 300 million shares of Citigroup, a new position for the firm. Offsetting this is the sale of 8.2 million shares of Bank of America (which at 160 million shares is still the firm's second largest holding). Paulson has also divested his entire 2MM share Goldman Sachs stake.

Remember Citi? The bank that once did stuff like investment banking and research, sales and trading, and some other things, and was a little more than just a zombifying and rapidly decaying ward of the state? Neither do we. For a vivid example of how things have changed, Citi today's added BAC stock to its "top picks live" list... and nobody gave a rat's ass. In fact the financial action was driven by Dick Bove's earlier downgrade of some regional banks, dragging down such "opportunity" firms as Bank of America with them. Yet Citi knows a thing or two about a thing or two, specifically that BofA, once it is done with all the assorted litigation facing its soon to be ex-CEO, and any potential dangers over the other orange guy they got for a steal when they acquired Countrywide, and maybe even prior, will need to raise capital, especially if its star traders want to be paid for churning the bejeezus out of stocks like Citi, CIT, FNM and FRE (and maybe BAC itself). The amount of the offering will have to be at least $45,000,000,001, in order to pay back the $45 billion of government TARP aid still on the books, and the token $1 for General Corporate Purposes.

Ahead of tomorrow's Committee of Oversight and Congressional Reform hearing on the Bank Of America - Merrill Lynch strong-arming by the Fed, entitled "Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a Federal Bailout? Part IV" (which may or may not happen), Dylan Ratigan discusses some salient points with California Republican Darrell Issa. As a reminder, prominent witnesses tomorrow will be BofA GC Tim Mayopolous and Directors Charles Gifford and Thomas May.

A month ago Zero Hedge speculated that the SEC was preparing to throw Wachtell Lipton and Ed Herlihy at the wolves, in case its planned settlement to indemnify Ken Lewis of all sins failed. Well, it failed, now that a jury trial is in the works to determine just how guilty Ken Lewis et al have been of shareholder fraud. And, as expected, Wachtell Lipton is about to be run over by a 200 ton freight train.

In an ominous, one sentence disclosure just filed in Southern District Court of New York, the SEC has advised that it will demand a trial by jury for "all issues so triable." It appears the common man will finally have his say. Woe to ex-CEO Ken Lewis.

"If you reduce the increasingly difficult situation facing the largest banks down to its essence, the problem is politicians picking winners and losers. If we don't have losers in our economic life, then there are no winners either. If we don't resolve troubled banks, then all of our banks will be bad, as the century-old Whithers quote above suggests. And the fact that Washington will not let large, mediocre institutions such as BAC fail means that our entire financial system is getting sicker, not recovering as the politicians ask you to believe. The different financial and operational situations facing BAC and other members of the large bank peer group illustrate the point." - Chris Whalen

REIT stocks benefited mightily from Merrill Lynch's generosity earlier in the year, when the ML REIT team issued follow on equity offerings, followed by prompt upgrades to the stock, although not necessarily in that order. The bottom line - roughly 5% in underwriter fees on almost $20 billion worth of new equity issued. And while last week's REIT massively downsized IPOs were an indication that the top for REIT stocks has come, that has not prevented Ken Lewis' firm from continuing to profit handsomely from the next shoe to drop in real estate.

The analyst upgrade games continue, even as gullible investor lemmings jump off cliffs to chase price target revisions and capital offerings, compliments of conflicts of interest too numerous to mention.

Developing story: The trap is closing, Ken Lewis is sweating, Hank Paulson is evaluating one way ticket costs to non-extradition treaty countries.

It just never ends: Goldman puts a company on the Conviction Buy list and 3 days later the company issues either bonds or stocks. The most recent beneficiary of this highly ethical practice: Spirit Aerospace. This is a topic that has been beaten to death on Zero Hedge, so we will just present the facts.

The stuff just got serious folks. "The FBI involvement opens up the possibility of criminal charges, although the scope and possible outcome of the probe remain unclear."

In a developing story reported by the AP, Cuomo has allegedly subpoenaed five relevant Bank Of America directors who had presumably been briefed on actions taken by the bank in its Merrill merger prior to the public disclosure, and is seeking their sworn testimony.