Freedom: Bank of America Corp

I think more banks are paying back their bail out money. This is crucial to have a free hand in what they intend to do without the need to get approval from Federal authorities.

Read this Reuters' report.

'Bank of America Corp today [3 Dec 2009]said it would repay US$45 billion (RM153 billion) of taxpayer bailout funds [Troubled Asset Relief Programme (TARP)]in the next few days, a move that could free the top US lender from pay curbs as it looks to hire a new CEO. The downside will be its vulnerability to further economic shocks.

The announcement is also a shot in the arm for the US Treasury, which has been under fire for the hundreds of billions in taxpayer dollars it has shelled out to corporate America during the financial crisis.

Bank observers said Bank of America's repayment may be the first in a wave of TARP repayments by major US banks that have yet to repay the government bailout funds, including Citigroup Inc and Wells Fargo & Co.

"Once the dam is broken, my bet is we're going to see other institutions announce total or partial repayment plans," said Tony Plath, banking professor at University of North Carolina- Charlotte.

The US government injected US$45 billion into Citigroup, while Wells Fargo received US$25 billion.

A US Treasury official called the repayment a step in the right direction, adding that replacing Treasury investments with private capital would provide a boost to confidence.

The announcement comes as the bank has bristled under US pay czar Kenneth Feinberg's curbs on senior management compensation. It has repeatedly expressed its interest in repaying the funds as soon as possible.

"I didn't think they were in any position to repay TARP. I was looking for that in another 12 to 18 months," said Bill Fitzpatrick, an analyst at Optique Capital Management in Milwaukee. "Given all the risks that are still embedded in the economy, it's more prudent to beef up your capital levels."

Under the terms reached with the Treasury, the bank will sell up to US$18.8 billion in securities that will convert into common stock once shareholders approve an increase in the bank's shares. The remainder of the US$45 billion would be repaid through US$26.2 billion in cash.

The bank is repurchasing all of its outstanding shares under the TARP programme, but not repurchasing the warrants.

"Our intention has always been to exit the exceptional assistance," said Bob Stickler, a company spokesman. "Our goal was to meet our obligation to taxpayers. We see this as a victory for the government's programme, as it did what it was intended to do."'

I think this is an early indicator that all is going to be well with the more well managed banks in America and may well herald the return of more confidence to Wall Street.