Of all of Bank of America's problems, paying back the government's $45 billion loan is perhaps the most consequential.
The bank is eager to free itself from the aid, which came from the government's Troubled Asset Relief Program, and all the strings that are attached. But it's not clear when the government will grant permission.
"We are ready and able to repay TARP," bank spokesman Scott Silvestri said this week. But the bank is "waiting for the government to establish the appropriate time," he said.
This month, the federal government asked the largest banks that still hold TARP, including Bank of America, to submit their plans for how and when they expect to repay the money. The banks will have to show that they can raise money from private investors — in other words, without government backing. They'll also have to show that, even without the TARP money, they would still meet stringent capital requirements that the government put in place after stress tests in the spring.
Analyst John McDonald wrote recently that "based on the numbers alone," Bank of America should be able to repay TARP immediately: In the second quarter, it more than met the stress test mandates by raising $40 billion, which was $6 billion more than the government required. Also, in recent months, it issued $10 billion in debt without government backing, and it has stopped borrowing from two Federal Reserve programs.
But the government can be a fickle lender, which complicates the repayments. This fall, Bank of America took an early exit from a January agreement that would have required the government to cover some of its potential losses. The government charged the bank $402 million before it could exit.
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