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Why B of A is selling and Citi is lending

A Bank of America ATM

TEXT OF INTERVIEW

STEVE CHIOTAKIS: It's the morning open. And before we talk about the markets and where they are this morning, let's bring in Juli Niemann right now, analyst with Smith, Moore and Company in St. Louis. We're going to talk a little about the day's topic and their top economic stories. Good morning, Juli.

JULI NIEMANN: Good morning.

CHIOTAKIS: All right, banks seem to be on the front burner today. Let's talk about Bank of America, reportedly selling more than $7 billion worth of shares in China Construction Bank to some Asian investors. They're trying to raise that capital, bolster their bottom line, but it needs still, what, another $27 billion. How much of this, Juli, is the government saying raise that capital and how much of it is B of A talking and looking at its bottom line?

NIEMANN: Well they have to do a combination of things. Over a week ago the government just basically laid hands on those 19 biggest banks and said, 'arise, you will not be allowed to fail.' So Bank of America is doing it two ways. One, they will be having a stock offering. They're going to sell off more of China Construction Bank. There's a lock on the rest of it now, but in the fall they'll be getting rid of the rest of it. So they're just going to keep plugging toward that $33, almost $34 billion in capital shortfall here.

CHIOTAKIS: It's almost like a bank-a-thon.

NIEMANN: You've got it exactly. Sell, sell, sell.

CHIOTAKIS: Yes. Sell, sell, sell. Citigroup said today it used most of it, almost every bit of that $45 billion of taxpayer money to make loans. Who are they lending to?

NIEMANN: Well, unlike many banks who held their TARP cash in a death grip, Citi is actually lending -- new mortgages, cars, business suppliers, and of course they do a lot with state and local governments. That $45 billion is finally achieving what the Obama administration wanted to begin with -- lending.

CHIOTAKIS: They've had this money for so long. Why are we hearing about this right now?

NIEMANN: All of the corporate, all the banks, basically were clutching their TARP money in a death trap simply because they felt that they were under-capitalized. Now that the stress test is out of the way, it's public as to what their shortfalls happen to be. They actually are free to lend again because they know what the consequences will be.

CHIOTAKIS: All right, Juli Niemann joining us from St. Louis this morning. Thank you, Juli.

NIEMANN: You bet.

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