Bank of America Pledges to Repay Bailout Money
More good news from Bank of America this week. Wednesday evening they made the announcement that they will repay the entire $45 billion that they received as a government bailout to keep them solvent.
The $45 billion was part of the government loans that the Obama administration issued to banks and financial institutions to keep their doors open.
Bank of America will be looking to replace their CEO Ken Lewis who is resigning at the end of this year. By repaying the bailout money they will be in a much stronger position to attract a leading candidate to take over.
No chief executive would want to walk into a company that is saddled with a $45 billion deficit right off the get-go so this is a wise tactical decision. It also helps to remove the stigma of needing bailouts to begin with. To a point anyway.
The bank plans on using available cash to repay the loan but will also need to raise an additional $18.8 billion in order to do so. It has been reported that the bank has already been actively participating in talks to pay back the money.
Most experts in the financial industry are rather surprised that Bank of America is in a position to pay back the loan so quickly. They got themselves and to deep, deep trouble by issuing mortgages and credit cards to subprime candidates.
At one point they got so silly that they actually started giving credit cards to illegal aliens. The result, of course, is that they now face record high default rates. We sincerely hope the Bank of America gets their act together and has learned their lesson.
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