CHARLOTTE, N.C. — Bank of America Corp. has the financial wherewithal to repay the $45 billion it received in taxpayer aid and still be considered well-capitalized. But does it have the political wherewithal?
Ongoing disagreement with government regulators, coupled with concerns about loan losses and anticipated new banking rules, are contributing to a delay in BofA’s returning the money. And with no end in sight for those challenges, some observers believe the bank will remain under the government’s thumb for the long term.
“It’s like the Hotel California,” UNC Charlotte finance professor Tony Plath says of BofA’s situation. “They can check out anytime they want, but they can never leave.”
A year ago, with the economy on the verge of collapse, BofA accepted $15 billion from the government’s then-new Troubled Asset Relief Program. Eventually, the amount of taxpayer aid tripled to $45 billion as BofA agreed to buy Merrill Lynch & Co., tried to back out, then said it would close the deal if more government money were provided.
Initially, TARP — intended to improve banks’ capital and bolster lending — helped BofA survive a near-collapse of the market and swallow its risky deal with Merrill. But since then, the government aid has opened the bank to stricter regulations that have led to an overhaul of its board, pay cuts handed down from the government’s “pay czar” and the upcoming retirement of Chief Executive Ken Lewis.
This week, bank spokesman Jerry Dubrowski said the bank is “ready and able” to begin repaying the money. However, he says BofA is waiting for federal regulators to approve a repayment plan.
To read the complete report in the Charlotte Business Journal, click here.