Bank of America to pay back $45B of TARP

NEW YORK - Bank of America Corp. said yesterday that it planned to repay its $45 billion in government bailout funds in the next few days, a move that will help the troubled bank recruit a new chief executive officer.

The bank said in a statement that it would use available cash and raise $18.8 billion in capital to repay the money, which it received during the height of the credit crisis last year and after its purchase of Merrill Lynch & Co. Inc. this year.

Bank of America has been searching for a successor to chief executive Ken Lewis since the bank announced in late September that he planned to retire Dec. 31. But the bank, burdened with government restrictions and close oversight after accepting the Troubled Asset Relief Program funds, has so far been unable to sign a new CEO.

"It removes the stigma that we've had as a company," spokesman Bob Stickler said of the planned repayment. "We become more attractive to a CEO candidate."

The bank has said it is considering candidates from inside and outside the company. Stickler said a decision was expected "in the near future."

"This will help with the CEO search by taking off the pay restrictions," banking analyst Bert Ely said. "The word you keep hearing with Bank of America and AIG is that the compensation issues are a problem."

Insurance company American International Group Inc., which received a $182.5 billion bailout after running into trouble with complex credit derivative securities, has also had recruiting problems.

Ely agreed that the restrictions put forth by federal pay czar Kenneth Feinberg had likely been an obstacle to finding the best CEO candidate.

The Treasury Department said in a statement that it was pleased that Bank of America planned to repay the TARP funds.

The bank said it had paid $2.54 billion to the government so far in dividends on the TARP money. BofA said it was not yet exercising its right to repurchase warrants that the government received in return for the bailout money. Warrants allow the holder to buy stock in the future at a fixed price.

As of Oct. 31, nearly 50 financial companies returned a total of $72.3 billion in bailout money. Other big banks, including Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley, repaid their bailout funds after they were given permission to do so by the government in June.

Treasury also made $6.79 billion in dividends from the TARP money and $2.90 billion selling warrants.