So this is kind of good news from WSJ:
Bank of America Corp. (BAC) is offering to repay part of its bailout money, and the U.S. is pushing for the bank to pay at least $500 million to shelve a tentative pact that would have had the government share its losses on certain assets.
The moves, described by people familiar with the matter, both relate to an extra measure of federal aid given to help BofA complete its acquisition of Merrill Lynch & Co. Both sets of discussions, if completed, would enable BofA to reduce a layer of federal involvement in its affairs.
The bank took $45 billion from the government, and isn’t ready to pay back the entire thing. It will start with $20 billion. That’s good. As taxpayers, we’re looking forward to getting the money back, and having a check sent to each one of us for our share.
And it’s also a good sign that the bank is willing to pare back the government guarantees on its Merrill Lynch assets, which cratered so disastrously last December. Even without many of these losses coming to fruition, the bank still owes the taxpayer a lot for offering that protection. Government guarantees — insurance products, essentially — shouldn’t be free, even if they’re not used.
And though in many of these cases (Bank of America, AIG, Citi, Fannie Mae, Freddie Mac) it may be that we don’t end up having to furnish the full extent of the guarantee, it does set a potentially dangerous precedent, whereby government can promise a guarantee, and get used to the idea that they really won’t have to pay it off ever.
Politicians love making contingent offers like this, since it appears they’re not really spending that money. But there’s certainly still a potential cost, and that needs to be propertly accounted and compensated for.