Ken Lewis may think his bank is healthy but the market remains sceptical. Shares of Bank of America have rallied today on the news that Lewis and some BofA directors bought stock. But the bank got some bad new too.
As Paul Jackson at Housingwire writes, Friedman Billings bank analyst Paul Miller pointed out yesterday that Bank of America might need more than $80 billion. “It would take over $80 billion of new common equity to reach even the low end of the range, and we believe Bank of America simply is not generating sufficient capital internally in this environment to put a dent in this size capital hole,” Miller wrote.
That money will likely have to come from the government, since there is no one in the world willing or able to give Bank of America anywhere near that much money, which is almost twice it’s market cap.