Leaking

by Larry Levin

Last week I said that the Fed's would reveal the stress test results to the banks only and the public on May 4th. In the meantime, however, there would be leaks. It looks like that has started. According to Bloomberg, Bank of America needs another $70-billion.

In late February Ken Lewis said, "Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity, and earnings power to make it through this downturn on our own from here on out."

Hey Ken, not so much. According to Freidman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm, Bank of America Corp. needs ANOTHER $60 billion to $70 billion of capital.

But it's not just Mr. Miller saying this, the Fed's agree. Regulators told Bank of America Corp. and Citigroup Inc. today that the banks may need to raise more capital ($billions) based on early results of the government's so-called stress tests of lenders.

But it won't just be BofA and Shitibank; I believe Wells Fargo and others will need to "bolster" their capital bases as well. In fact, some leaking from the report suggests that 17 of the 30 regional banks may not have sufficient capital based on existing capital tests.

Question: Does anyone still believe in the 1st-Q "earnings" from the banks? Puhhhlleeeeeeaasseeeeee!

Yesterday I said, "...If you own this stock, I might suggest you file lawsuits against all three of these clowns and vote against Lewis keeping his post as CEO." Apparently others agree.

The California Public Employees' Retirement System, or CalPERS, says it will vote against re-electing all 18 Bank of America board members, including CEO Ken Lewis because they failed to disclose information on Bank of America's acquisition of Merrill Lynch.

"The entire board failed in its duties to shareowners and should be removed," Rob Feckner, CalPERS board president, said in a statement Tuesday.

Some Ken Lewis comments...

As for the acquisition of Merrill Lynch, Lewis said he had no regrets in making it, and that "It will turn out to be a good investment over time." Uh-huh, sure it will.

Lewis said that other firms wanted to invest in Merrill and that "BofA couldn't let the deal go, and we thought it was in our best interest and in the country's best interest to go ahead with the Merrill takeover." What about the part where you were coerced into the acquisition or else you would be forced out?

"Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity, and earnings power to make it through this downturn on our own from here on out." Uh-huh.



Previous Day's Trading Room Results:

Trade Date: 4/28/09

E-Mini S&P Trades*
(before fees and commissions):

1) OTF buy @ 10:10am at 854.00 = b/e (1 lot)

2) OTF sell @ 11:10am at 854.75 = b/e (1 lot)

3) Algorithm positions (1)...combined Secret's and Algo total...+1.00


Electronic (YM) Mini-Dow:

1) None today



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