How Do You Raise Capital Without Having to Raise Capital?

According to the leak du jour, BAC needs $34b in equity capital in order to absorb the losses estimated in the ‘stress test.’

Considering that they’ve already received $45b in preferred stock from the US taxpayer, an accounting maneuver of converting that to common can, Voila, cure their capital needs without raising a penny of new money, a move that
even the magician David Copperfield would be in awe of. BAC can also sell assets as to limit the dilution to their shareholders.

Until the banking system starts replacing debt with equity by either exchanges or by dramatically shrinking their balance sheets, all the capital raises are more about plugging holes and hoping for the rain to stop as opposed to lowering the overall leverage of the banking system. ABC confidence rose 2 pts to the highest since early Oct.

The MBA said purchases rose 5% after 3 weeks of declines. Refi’s rose 1.2%. ADP jobs report is out today.

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