Russ Krull

Bank of America Should Pay Back the 5 Percent TARP Shares First

Two points:

1. Lewis has been saying he wants to pay back TARP for several months. All those statements lack a key piece of information - where is he going to get the money to do it? The WSJ report missed that little detail as well. I'll believe BAC is buying back TARP preferred when they cut the check.

2. Did your analysis consider that the rate on the 5% preferred jumps to 9% in four more years? If BAC can't start paying back for another year or so and has to pay the shares back gradually out of earnings (likely), the taxpayer could be better off if they pay the 8% preferred (with no rate jump) back first.