Bank of America Needs to Raise $33.9 Billion in Additional Capital

May 6, 2009 by · Leave a Comment
Filed under: Industry News 

Well we will see how these “stress test” results look on Thursday.  I have heard anywhere from 10 to 16 of the 19 biggest banks we need to raise additional capital to maintain an adequate reserve ratio.   The problem I have with these tests are the fact that if you look at the criteria of the tests, they really painted a recovery this year and an additional 7 to 15% decline in housing prices.  

Maybe we can keep good economic numbers while we have all of these government backed programs to prop up our failed financial system but once those need to be reigned in and all that cash that has been pushed into the system, starts to flow around.  I believe we will be in the same position as last October or even worse.  I guess we can keep our fingers crossed and our guns loaded?   

News (NY Times):

The government has told Bank of America it needs $33.9 billion in capital to withstand any worsening of the economic downturn, according to an executive at the bank.

If the bank is unable to raise the capital cushion by selling assets or stock, it would have to rely on the government, which has provided $45 billion in capital through the Troubled Asset Relief Program.

It could satisfy regulators’ demands simply by converting non-voting preferred shares it gave the government in return for the capital, into common stock.

But that would make the government one of the bank’s largest shareholders.

Executives at the bank, one of the largest being examined, sparred with the government over the amount, which is higher than executives believed the bank needed.

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