Americans rebounded from a weak holiday season and stepped up spending on retail goods in January. The latest government report on retail sales pointed to a slowly improving economy. Retail sales rose at a seasonally adjusted 0.NEW YORK – Bank of America’s surprise move to repay $45 billion in federal bailout money ratchets up pressure on rivals Wells Fargo and Citigroup to get out from under the government’s thumb. But don’t expect it to happen soon.
That’s because many banks, including Citi and Wells Fargo, still face big losses on loans as people fall behind on bills – losses that could further erode their capital and put them in danger.
Moreover, the government might be reluctant to let them repay until they’re confident that no further assistance will be needed.
If the economy were to seriously weaken again, the government could be forced to inject more money into big banks.
Bank of America Corp. said Wednesday it will use available cash and raise $18.8 billion in capital to repay the money, which it received during the height of the credit crisis last year.
It would become the first of seven companies that received “exceptional” government assistance – bailout funds beyond the initial TARP injections – to pay back taxpayers in full.
In doing so, Bank of America would join JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group as large banks that have cut ties with the government – and broken free of limits on executive compensation and other restrictions. While those banks also have had steep loan losses, they’ve been able to offset much of the damage with strong profits in their trading divisions.
