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Report: Bank of America facing $35 billion capital shortfall

May 5, 2009 |  9:48 pm

The latest leak on big banks' capital needs, ahead of the government's announcement of the "stress test" results on Thursday, has Bank of America Corp. needing $35 billion to bolster its balance sheet.

From the Wall Street Journal’s website:

Regulators have told Bank of America Corp. that the company needs to take steps to address a roughly $35 billion capital shortfall based on results of the government's stress tests, according to people familiar with the situation.

The exact amount of the needed infusion couldn't be determined late Tuesday, and Bank of America officials either declined to comment or couldn't be reached.

The capital number for BofA has been a moving target. Over the weekend, the Financial Times said the bank already was working on raising $10 billion in capital. A BofA spokesman on Monday said that was "completely inaccurate."

Maybe because it was supposed to be $35 billion?

As the Journal notes, if BofA can’t raise the needed sum from private investors, it could solve its capital problem -- for balance-sheet accounting purposes, at least -- by converting the government’s $45 billion in preferred BofA shares (the TARP infusion) to common shares. But that would make Uncle Sam a major voting shareholder in the bank -- de facto nationalization.

Despite the rumors in recent days, BofA shares jumped 19% on Monday and added 4.4% on Tuesday, to close at $10.84.

-- Tom Petruno