Bank of America completes TARP payback, freeing itself from government pay restrictions

BofA repays $45B in government bailout funds

CHARLOTTE, N.C. — Bank of America Corp. said Wednesday it has repaid the entire $45 billion it owed U.S. taxpayers as part of the Troubled Asset Relief Program.

Bank of America, which announced its agreement with the U.S. Treasury to repay TARP last week, funded the repayment through a combination of cash on hand and the sale of $19.29 billion of securities that would convert into common stock. The stock increase remains subject to shareholder approval.

In a prepared statement, CEO Ken Lewis said the company cleared a key hurdle in demonstrating the economy’s broader health, and said the bank looks “forward to continuing to play a key role in the economic recovery.”

Bank of America was among hundreds of banks that received government support through the government’s TARP program. The bank received $25 billion as part of the initial round of investments when the credit crisis peaked last fall. It received an additional $20 billion in January shortly after it acquired Merrill Lynch in what was a heavily scrutinized deal.

Repayment of the funds frees the Charlotte, N.C.-based bank from the government restrictions that have hampered its search for a new CEO, including executive pay limitations.

Bank of America has been searching for a successor to Lewis since it announced in late September that he planned to retire on Dec. 31.

Bank of America’s board met Tuesday to discuss potential replacements for Lewis, but no decision has been made. Bank of America spokesman Scott Silvestri said Wednesday that a decision will be made “in the near future.”

Bank of America is considering both external and internal candidates to succeed Lewis.

BofA’s Chief Risk Officer Gregory Curl and Brian Moynihan, the head of consumer banking, are among the top contenders. However, both men have been criticized by analysts as lacking experience or being too close to the Merrill deal.

Treasury said that with Bank of America’s $45 billion repayment, the total amount of repaid TARP funds is now $116 billion. That’s out of a total of $453 billion that the government has extended to banks, insurers, automakers and other companies under the program.

Treasury now estimates that total bank repayments could reach up to $175 billion by the end of 2010, the agency said in a release Wednesday. That would cut total taxpayer exposure to the banks by almost three-quarters from the peak. Total bank investments that were expected to cost $76 billion now are projected to bring a $19 billion profit, the agency said.

On Wednesday the government said it would extended the $700 billion financial bailout program until October. That sets up a conflict between Democrats, who want to use some of the leftover money to help generate jobs, and Republicans, who say it should be used to reduce budget deficits.

Bank of America shares fell 2 cents to $15.39 Wednesday.

AP Business Writer Daniel Wagner contributed to this story from Washington.