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Steve Chiotakis: Bank of America has reached a deal to pay back the $45 billion in bailout money. The first of the banks to repay the cash from the federal government. Marketplace’s Amy Scott joins us live from New York this morning. Good morning, Amy.
Amy Scott: Good morning.
Chiotakis: So what are the terms?
Scott: Well, I should say that it’s the first of the banks that received “exceptional assistance” that’s paying back the money. And it plans to pay it partly with cash and to also raise more than $18 billion in new capital by selling securities that — assuming it gets permission from shareholders — can later be converted into stock.
Chiotakis: And Bank of America is hunting for a new CEO. Is that going to help?
Scott: That’s what analysts are saying. Ken Lewis is planning to retire at the end of this month. And, of course, the bank has been limited to restrictions by pay czar Kenneth Feinberg. So as a Bank of America spokesman put it, this removes the stigma.
Chiotakis: And Bank of America was one of the most troubled banks, right? What does it say about the state of banking right now?
Scott: Well banks like Wells Fargo and Citigroup have yet to pay back their bailout money. And, of course, banks are still facing heavy losses on loans. Alistair Milne teaches banking and finance at Cass Business School in London, and he says we’re not out of the woods yet.
Alistair Milne: Many banks are going to be in a weak position to do a lot more lending. So I think we’re going to see something of a shortage of credit for actually some years to come.
Bank of America lost more than $2 billion last quarter, so while the Treasury Department believes the bank is healthy enough to pay back the taxpayer money, of course it still faces a lot of challenges.
Chiotakis: All right, Marketplace’s Amy Scott with us from New York. Amy, thanks.
Scott: You’re welcome.
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