BofA: Bailout Money Made Us Weakerby Tim Manni
Bank of America’s Chief Executive Ken Lewis said today that the $20 billion his institution received in order to secure their takeover of Merrill Lynch was a “tactical mistake.”
While not regretting taking the money, Lewis said he acted far too cautious, and should have requested less. The result caused market observers to view the bank as weak as their competitor Citigroup:
“In hindsight, it was a tactical mistake because it put us in the same category as Citigroup,” said Mr Lewis. “We could still have had 8 per cent tier 1 capital after a $15bn loss but we wanted a cushion.”
Mr Lewis said that it would have been better to request only $10bn for that purpose. He said that could have helped to curtail investor fears that further problems were in the offing.
Despite his regrets, Lewis has remained dedicated to repaying the Federal loan, saying he won’t leave the company until they do so:
“I want to repay the Tarp money before I go anywhere, and by then I think we will be seeing the success of the Merrill Lynch acquisition,” he said. “It would be very easy to disappear into the sunset but we have to slug through this.”
Lewis’ admission should at least cause TARP administrators to think twice about how much money they are pledging to financial institutions. If banks are getting too much, it’s not only a “tactical mistake” for the Fed and Treasury, but an insulting admission to consumers who are footing the bill.