If Bank of America needs $34 billion, will Citi need $55 billion?

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When you add up all the various programs that the government has put in place since last fall -- $12.8 trillion -- it's almost as much as the U.S. GDP of $14 trillion. And most of that $12.8 trillion has gone to the people who created the problem -- banks. But is that $12.8 trillion enough? Is there any hope for the U.S. ever getting paid back? What happens if the borrowers decide not to repay the money? What if some repay and others don't?

These questions come to mind as bank stress test results trickle out. Bank of America (BAC) needs to come up with $34 billion and Citigroup (C) needs $55 billion. In the case of Bank of America, it could get much of the capital it needs by converting the U.S.'s preferred stock into common stock -- a move which would make the U.S. the dominant shareholder while reducing the cash flow drain of preferred dividends. And Bank of America is considering the sale for $8 billion of its stake in China Commercial Bank (CCB).

For Citi -- which already has $351 billion from the U.S. -- the capital raising demand is less extreme because it has already agreed to such a conversion, but it will still need $5 billion to $10 billion more from other sources. One possibility, if the government would agree to it, is to let private equity (PE) firms inject capital.

One such PE investor, Chris Flowers, believes he could raise $10 billion in 48 hours to buy banks and make a 35 percent return for his investors. But the U.S. won't change the law that keeps leveraged buyout firms from owning banks because it would give them too much control of the economy. And I agree -- although PE firms had way too much power in the 1980s and 2000s, letting them buy banks would put them over the top in the 2010s.

Meanwhile, if the U.S. wants to fix the financial system, it can't just look at the equity side of the balance sheet. After all, Citi got $45 billion from the U.S. for the equity side -- the other $306 billion pertains to loan guarantees. And a huge chunk of the $12.8 trillion I mentioned earlier is about government loan guarantees as well.

That's why the U.S. is now talking about round two -- debt stress tests. Banks have been heavily dependent on being able to borrow money cheaply through a program from the FDIC. And banks like Goldman Sachs (GS), JPMorgan Chase (JPM) and others that want to pay back the TARP money so they can be free of pay limits which will let them hire top talent from weaker competitors, are still dependent on the U.S. for cheap loans.

Perhaps the U.S. should extend its bonus restrictions to both sides of the balance sheet -- equity and debt -- to keep banks Goldman from paying back its $10 billion TARP for which it sold $5 billion in equity -- while continuing to enjoy its government debt subsidies -- including $22 billion from the FDIC. As I posted, the banks that are getting $200 billion in TARP money from Treasury are also getting $336 billion in cheap loans from the FDIC and another $1 trillion in emergency loans from the Fed.

Meanwhile, the appetite for boosting the bailout bucks from $12.8 trillion to $14 trillion appears limited so banks may have to learn to live within their means.

Peter Cohan is president of Peter S. Cohan & Associates. He also and is the author of You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns Citi shares and has no financial interest in the other securities mentioned.

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