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Ken Lewis, CEO of Bank of America, will step down in December, leaving the country’s biggest lender without a successor for now. Mr. Lewis’ surprise departure, announced late Wednesday night, ends a turbulent 8 year run at B of A and comes days after Morgan Stanley, JP Morgan Chase and Wells Fargo swept their executive suites. The move comes as Wall Street has rebounded from the crisis that followed the collapse of Lehman Brothers last year and led the US government to inject US$45B of taxpayer’s money into B of A. Mr. Lewis and B of A have been at the center of investigations by the US SEC, the House Committee on Oversight and Government Reform and the New York AG’s office over the bank’s acquisition of Merrill Lynch. Read more

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The revival of markets for bonds backed by auto and credit card debts is expected to be underscored today when the US Federal Reserve reveals details of its latest loans to investors in asset-backed securities. The Fed offers cheap funding every month to investors in such bonds under its term asset-backed securities loan facility (Talf), an emergency measure meant to support the markets through which hundreds of billions of dollars in consumer loans are financed. This month, Fed funding will be available for investors considering buying US$12B in eligible asset-backed securities sold by the likes of American Express, Bank of America, General Electric, Nissan and Ford. Read more

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Bank of America joined the crowd of financial institutions reporting good earnings last week. The Charlotte, N.C., bank beat the expectations of analysts by saying today that it had a US$2.42B Q-2 profit after the payment of preferred dividends. Bank of America has struggled through the acquisitions of lender Countrywide Financial Corp. and investment bank Merrill Lynch & Co., and looks like it is getting its financial house in order. After rising in early trading, Bank of America shares fell 35 cents to $12.82 in mid-day trading. The second-quarter profit amounted to 33c per share and compared with a profit US$3.22B, or 72c, a year earlier. Although the numbers were below last year’s, the earnings still beat the forecasts of analysts surveyed by Thomson Reuters, who predicted the bank would come in at 28c per share.

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US banks are looking to capitalize on strong Q-1 results and the end of the government “stress tests” to raise capital and rebuild investor confidence in the battered sector. Goldman Sachs is finalizing a plan to raise billions of dollars in the capital markets, a step that could pave the way for it to repay US$10B in government cash Successfully raising the funds could satisfy what has become an unofficial condition of being allowed to repay government loans, as government officials have told banks that they also need to demonstrate that they have solid investor support. Goldman had around UD$111B of cash and cash-equivalent securities in December 2008 The plans to repay the bail out money soon may be threatening to banks still in need of help, a list that could include Citigroup or Bank of America, as it would draw a distinct line between healthy and unhealthy institutions.

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Bank of America Corp. Chief Executive Officer Kenneth Lewis recently said that the US should consider separating commercial lenders from investment banking activities. Lewis made the comment on his way to a meeting with President Barack Obama and other peer US banking chiefs. Asked what he would tell Obama if given the chance, Lewis said it would be that “commercial banks are the fabric of any community in which they operate and we probably need to separate the commercial banks from the investment banking activities.” The remarks may reopen the debate on whether the U.S. should bring back laws put in place after the Great Depression designed to insulate lenders from the risks of investment banking. Bank of America, the biggest US bank by assets, bought Merrill Lynch & Co. in January, helping the largest US brokerage avoid the financial collapse that drove Bear Stearns Cos. out of business.

Popularity: 5% [?]

Investors cannot shake the fear that the US government will seize control of a Big Bank, but experts do not believe that will happen.

The word “Nationalization” puts fear in the hearts of bankers and their equity and debt holders like no other word.

The fear of such an event over the past few weeks has caused a lot of speculation that the US government may have to seize control and management of one or more of the country’s largest financial institutions.

This is the worry that has sent bank stocks into a death spiral, as shares of some of the biggest banks, including Citigroup (C), Bank of America (BAC), and Wells Fargo have been hammered in a big way.
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Popularity: 11% [?]