It was Polonius, from Shakespeare, who said, "Neither a borrower, not a lender be." Now financial giant Bank of America wants to narrow things down, and become no longer a borrower, just a lender.
B of A says it will pay back the 45 billion dollars it borrowed from the government under the TARP bailout plan, through a combination of slightly more than 26 billion worth of available cash, and slightly less than 19 billion in security sales. The good news? An American banking giant getting off the Government (and taxpayer) dole. The bad news? If you're a B of A shareholder (under the ticker symbol BAC), you may feel a bit of short-term pain, as the bank sells more stock to raise cash, diluting the value of your current shares.
Details of the pay-back deal are coming out gradually, but one thing we know is that B of A, founded in San Francisco in 1904 by the son of Italian immigrants, is currently looking for a new chief executive. Current CEO Ken Lewis says he'll retire at the end of the year. If B of A doesn't owe the government any money, it can pay the new CEO what it wants, without having to comply with Washington rules. Rules that will likely dog say, AIG, every step of the way for years.
The goal? Prove to customers, taxpayers, shareholders, potential CEOs, and politicians that B of A can once again stand alone as a financial institution, helping to lead the country back to where it was pre-meltdown. A noble goal, that hopefully will be followed by others in the weeks and months to come.
