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JP Morgan May Take Over Bank Of America
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| Contributor | particleman |
| Last Edited | particleman Aug 23, 2011 11:42pm |
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| Category | Speculative |
| Author | Douglas A. McIntyre |
| News Date | Tuesday, August 23, 2011 06:00:00 PM UTC0:0 |
| Description | There is a rumor circulating on Wall St. that JP Morgan will take over Bank of America within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon. The “merger” would completely destroy the value of BAC’s common shares.
The government feels that the deal may be necessary as Bank of America struggles unsuccessfully to close several transactions to bolster its balance sheet. The Wall Street Journal reported that the financial firm will need to raise $200 billion which would be another possible event that would wipe out common shareholders.
Under federal law, JP Morgan and Bank of America could not combine because together they would have too large a share of several financial markets in the US. Treasury would apparently work with other government agencies to have those rules suspended and then the new combined bank would sell assets to get back into compliance later.
The government’s preference for a deal with JP Morgan rather than a federal takeover may be because it does not want to set the precedent of Washington owning one of the world’s largest banks “paid for” with taxpayer money. |
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