A couple days ago, we were hearing leaks from "people familiar with the matter" who said that the stress test's "preliminary findings have revealed that Citi, which has already been bailed out three times by the authorities, could need an extra $10bn or more if the economy worsens. BofA, which has had $45bn in government aid, was found to need well in excess of $10bn."
Today, we're hearing that "well in excess of $10 billion" means an eye-popping $35 billion. As Kevin Drum notes, that's nearly half the value of the entire company. BofA either needs to raise this money on the private market or come back for more government funding (which could take the form of TARP funds or equity purchases or something else I probably haven't thought of). They're promising to find it on the market, but that seems virtually impossible. J. Steele Alphin, the BofA executive dispatched to give the Times some calming quotes, is keeping a brave face, however.
“We’re not happy about it because it’s still a big number,” Mr. Alphin said. “We think it should be a bit less at the end of the day.” You're $35 billion in the hole and you're quibbling because you think that's a bit high? This is like getting weighed at the doctor's office and finding you've hit 350 pounds only to complain that they didn't let you take off your shoes. Not. The. Point. But more impressive is this bit: “There are several ways to deal with this,” Mr. Alphin said. “The company is very healthy.”
Question: If someone had taken Mr. Alphin aside five years ago and asked whether Bank of America would ever need $35 billion in new capital, and if so, would that be a "healthy" situation for the company, what do you think he would have said?