Bank of America set to repay Troubled Asset Relief Program

NEW YORK — Bank of America Corp. said Wednesday it plans 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 CEO.

The bank said in a statement 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. earlier this year.

Bank of America has been searching for a successor to CEO Ken Lewis since the bank announced in late September that he planned to retire on 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 chief executive.

"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. Whether that means we get somebody external is impossible to say."

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

Investors were relieved by the news, and sent Bank of America stock up 3.3 percent in after-hours trading.

"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 have likely been an obstacle to finding the best possible CEO candidate.

"There could be someone saying, 'I'm not going to take this job unless you pay back the money and get out from under the pay czar," Ely said.

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

The bank said it has paid $2.54 billion to the government so far in dividends on the TARP money.

BofA said it is not yet exercising its right to repurchase warrants that the government received in return for the bailout money. Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.