Stress Test Update

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.

The New York Times reports that the Treasury’s stress test has determined that Bank of America needs $33.9 billion in new capital.  That’s nearly half the current value of the entire company, which has a market cap of about $70 billion.

If BofA can’t raise this money itself, it means either (a) more TARP money or (b) conversion of the Treasury’s current $45 billion in preferred shares into common shares.  I continue to think that (b) is little more than a shell game, but better minds than mine have suggested that it would have some genuine value.  If that’s what happens, conversion at Tuesday’s closing price would give the government a one-third stake in BofA.  But if their stock plummets and conversion happens at a lower price, Treasury could end up with a majority stake.

On the other hand, BofA’s chief administrative officer bravely says they have plenty of options for raising the money themselves before they have to strike a deal with the feds.  For example, BofA could decide to quickly sell a third of its stake in China Construction Bank, which would bring in about $8 billion.  The sale of First Republic and Columbia Management could generate about $4 billion.

Maybe.  It’s hard to say at this point.  But $33.9 billion is a lot higher than anyone’s been talking about so far.  Any way you slice it, it’s bad news for Ken Lewis.

THE TRUTH IS...

what drives Mother Jones' team of 50-plus journalists. The truth is powerful, as evidenced by how hard those with something to hide, or profit to gain, seek to discredit it. The truth, stated boldly and reported meticulously, is what draws so many readers to Mother Jones.

And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

payment methods

THE TRUTH IS...

what drives Mother Jones' team of 50-plus journalists. The truth is powerful, as evidenced by how hard those with something to hide, or profit to gain, seek to discredit it. The truth, stated boldly and reported meticulously, is what draws so many readers to Mother Jones.

And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate