Friedman, Billings, Ramsey analyst Paul Miller says that Bank of America (NYSE: BAC) needs more than $80 billion in new common equity. The company currently has $61.7 billion in equity supporting $2.4 trillion in assets. The FBR report notes that "It would take over $80 billion of new common equity to reach even the low end of the range, and we believe Bank of America simply is not generating sufficient capital internally in this environment to put a dent in this size capital hole."Uh-oh. The Treasury Department has been plowing money into Bank of America, but the company still apparently isn't anywhere close to achieving stability. Bank of America's stock price has plunged 20% or so today, leaving it down about 60% so far this year.
Of course an outright collapse of the bank would be a disaster for the economy, but before we plug more taxpayer cash into a sinking ship, it would be a good idea to keep in mind what a lousy track record this company has with consumers: unjustified and inexplicable rate hikes imposed on consumers who have done nothing wrong, ripoff savings accounts, predatory credit cards marketed on college campuses, and checking accounts loaded with gotcha fees.
The company still has a market cap of more than $35 billion but I have a proposal: If Bank of America is to get another dime of government cheese, common stockholders should be wiped out so that the benefits of any turnaround can accrue to taxpayers.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
1-20-2009 @ 4:00PM
BHarrison said...
BAC should be put into bankruptcy . . . and the CEO, CFO, and other uppermanagement personnel should be fired . . . and they should be indicted and prosecuted if they have orchestrated or perpetuated any of the pyramid or Ponzi schemes or other FRAUDS. The USA cannot afford or tolerate these unethical and CRIMINAL "businessmen" (sic. crooks)
Now that Obama is in office, it IS time for change . . . let's see what Obama does now.
1-20-2009 @ 4:56PM
Sheldon said...
They needed MER like they needed a hole in their heads!!!!!!
And paid management tens of millions to get the deal done too!
1-20-2009 @ 9:11PM
forestpark said...
Merrill Lynch was jammed down BAC's throat. They tried to back out but Feds said "NO!" RE: taxpayer and stockholder. I am both, and so are all the rest of the stockholders. They are not exclusive to each other. Keep a cooler head, Bisonnette.
1-20-2009 @ 6:16PM
Carlron said...
Bank of America is the corrupt , mismanaged bank in our country.
After 8 1/2 years of Lawyers and courtroom fanageling and being denied a trial by jury and watching my company's deposits of $134,00.00 disappear and cost us a family business, that was 38 years old.
Bank of America-Close your doors. Enough is enough!
Wake up America!
1-21-2009 @ 2:53PM
SMach said...
Insightful analysis? FBR should know trouble when they see it. Check their website news releases:
http://phx.corporate-ir.net/phoenix.zhtml?c=71352&p=irol-newsArticle&ID=1224015&highlight=
1-21-2009 @ 10:20PM
taikonaut2k said...
How about this proposal for you:
FBR handing you a pink slip tomorrow you dumb-headed ignorant PoJ!
In this time of economic crisis, all we need is more stupid comments from idiots like you to proposal wiping out common stock investors so that the stock market can go down to $0 and somehow that would be good for our shaky economy and the taxpayers? How dare you to call yourself an analyst?
1-21-2009 @ 6:17PM
COskier said...
I don't see why shareholders should be held accountable for this...
What about the analysts that study these companies and should have seen this coming years ago?...and warned shareholders and future shareholders.
Nice article SMach...
1-22-2009 @ 12:10PM
colorblindwhitey said...
Wow! This article has to be the worst example I've seen yet of irresponsible, opinionated venom, supported by very little if not incorrect information. I'm a taxpayer and a stockholder. And, if you keep writing trash like this, I guess I'll be the one paying your unemployment! Yeah, BAC is not perfect. I've lost a ton. So has eveybody else. Let's get constructive, not trashy. I'm with forestpark on this one.
1-23-2009 @ 4:08PM
SMach said...
Why are FBR and a few others hammering this story? Somebody selling BOA short and hoping to make some dough at their expense? I'd like to see if there is any connection. - Steve