Bank of America Fights Back Government Takeover Rumors

Bank of America stock plunged below $4 last week on rumors that Bank of America would go back for more TARP funds or even be taken over by the US government. Embattled CEO Kenneth Lewis said rumors of a government takeover was "absurd."

Having take $45 billion in bailout funds--taxpayer money--there is significant concern about Bank of America operating effectively. As Congress begins to add operating strings to TARP funds, investors get nervous.

In an interview with CNBC, Ken Lewis appeared hesitant and unsure in his answers to questions about salary caps and dividend freezes. Lewis said the $500,000 cap was not a concern for him, but he was concerned about 20-30 significant managers that may become risks--going to foreign banks or other asset management opportunities.

Lewis emphasized the need to quickly get the Federal funds paid back and out of the bank. Unfortunately, Wall Street is taking a big chunk out of their valuations--down 58% this year. Falling below $4 a share, Bank of America is trading at the lowest levels since 1984.

Bank of America has made significant personnel cuts, laying off 35,000 employees. Bank of America attributes most of these cuts to redundant positions created by acquisitions. However, demonstrating a surge in opportunities in the mortgage market, they have hired 3,000 new employees in mortgage operations.

Lewis has been heavily criticized for overpaying for Countrywide and Merrill Lynch. However, much has been made of apparent Federal bully tactics to get Bank of America to follow-through on the Merrill acquisition.

Lewis fired back during a recent statement, saying a "case could be made" for overpaying for any bank acquisition in the last 18 months. Lewis' assurances seemed to steady the Bank of America stock, seeing a slight recovery in late trading.