Bank of America's little white lie
Bank of America (BAC) should have taken less TARP money. In a perfect world, that is. But when Congress approved the funds and Hank Paulson sent out the checks, virtually forcing them on many banks and brokerage houses, the financial world was going to hell fast and needed some stability.
Consumers, investors, and institutional money managers believed that some banks could fail, following Lehman into the ground.
BofA CEO Ken Lewis recently told CNBC, "That was my mistake. We took more [TARP funding] than we needed, in an abundance of caution, and I regret having taken that much." But it was not a mistake. It was a valuable insurance policy, and what Lewis does not want to mention is that his mistake with Merrill could have starved the bank for capital.
Lewis may be conveniently forgetting that his company's stock dropped 70 percent from the middle of last year through November.
What if the TARP had not existed? It is not a wild assumption that BAC shares could have dropped over 80 percent like they did at Citi. Lewis may also be forgetting the day that BAC said it was booking billions of dollars in losses from Merrill Lynch, losses it had not expected. Without the TARP funds would Bank of America have survived?
Lewis also told CNBCthat the economy might be getting a little better, but has a long way to go. But Lewis's running of the bank and bragging that he could have done without government funds takes away much of his credibility as a forecaster. There has to be some reason why so many people still want him to be pushed out.
Douglas A. McIntyre is an editor at 24/7 Wall St.