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Ken Lewis: the master of acquisition and stimulus PART III

9 March, 2009

7 January, 2009 – As it attempts to raise cash, to cover its losses Bank of America sells some of its stock,  in China Construction Bank for $2.83 billion.  (Financial Times)

16 January 09

Two weeks after closing its purchase of Merrill Lynch at the urging of U.S. regulators, (emphasis mine) the government cemented a deal at midnight (emphasis mine) Thursday to supply Bank of America with a fresh $20 billion capital injection and absorb as much as $98.2 billion in losses on toxic assets, according to people involved in the transaction. clip The second (emphasis mine) lifeline brings the government’s total stake in Bank of America to $45 billion and makes it the bank’s largest shareholder,  (emphasis mine) with a stake of about 6 percent. (IHT)

Why was BofA rewarded for buying another failing financial institution?  Didn’t BofA know that Merrill Lynch was about to go under?   Did they know or just assume that the Federal Government was going to give them more of our money so they could consider throwing it after more acquisitions in order to become the largest government-owned bank in this country?

On 2  February 2009, BofA released these statistics:

Bank of America earned $4 billion in 2008, but reported a fourth-quarter loss of $1.79 billion (BofA Press Release)

Bank of America earns $4 billion, but looses $1.7 billion and then gets $20 billion in yet another bailout.  Does this make sense to you?

And then, one week after the bailout passes, we learn that the “lifeline” the government threw to BofA was to provide bonuses to the very people who had driven Merrill Lynch to the brink of failure.  The citizens of this country have been asked to fork over $15 billion dollars of the rescue plan to reward the ineptitude or greed (whichever it was that prevented the executives of Merrill Lynch from doing a better job;  failure deserves its rewards too, but for most workers it would be docked pay or a pink slip.)

On the same day, this entry appeared on  The Blotter with Brian Ross:

Despite a near collapse that required $45 billion in federal taxpayer bailout funds,Bank of America sponsored a five day carnival-like affair just outside the Super Bowl stadium this past week as President Obama decried wasteful spending on Wall St. (ABC News – video available at the link)

This is incredible, is it not.  BofA spends nearly 10 million dollars for seats and parties at the Super Bowl while holding out it hands for more taxpayer money.  Obviously, American bank should be expected to pass up a chance to have a good time, even if the citizens it has gouged by its high rates, fees, and faulty acquisitions can barely make it from paycheck to paycheck.  (I must say, however, that our presidential inauguration was not exactly a model of modesty or sympathy, so perhaps I am being too hard on those who live in the among the rich and famous. Even those who come from humble beginnings are so  easily tempted by their own success.) Bank of America defended the expenditures as a “growth strategy” according to Ross’ story.  Kinda like Countrywide was a growth strategy?  or Merrill Lynch?  I guess, BofA grew – at our expense.

Except that Countrywide wasn’t such a good deal. By February,

Bank of America has decided to plaster over the Countrywide Financial and replace it with “Bank of America home Loans.” The reason: Few people want to go to a company whose name is synonymous with mortgage fraud, housing bubbles, misleading sales tactics and foreclosures. (bloggingstock)

Also in February, 2009, The Associated Press reports that

Bank of America Corp. is looking to sell First Republic Bank, a private bank it inherited from Merrill Lynch & Co., according to a report by the Wall Street Journal.

Mar 02, 2009 – Still looking to raise capital, B of A suggests it might sell more of its shares in China Construction Bank  (ZIBB)

That’s it; I can’t write about it anymore.  Three blogs and there is still so much to know about Lewis and the Bank.  But for now I must stop; I am finding myself slipping into a mind-boggling depression at what I see as “greed,” “corruption,” and a sense of being above the law – like the outlaws of the old west (except that they were robbing banks).  We all  saw it a few weeks ago when we read about Lewis’ refusal to cooperate with the Attorney General of NY about the bonuses to Merrill Lynch, when we watched the video of his big luxury jet landing in NY and him as he sauntered off to his limo – arrogant and untouchable.  This is what happens when the money and  government are allowed to play in the same sandbox.  Kenneth Lewis will get whatever he wants to keep his Bank afloat; he is too big to fail.

The “little” people are the ones who suffer, cause we are the ones that keep his ATMs humming.

More Bank Bailouts will be needed because those people can never have enough.

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