You wrote, "BAC has to keep on paying dividend. Remember US govt has BAC prefer too. Will they let BAC stop paying dividend. Before it happens, other bank will take it over. Another bank will assume the prefer. "
You're wrong. You need to remember. Or use Google. BAC repurchased the preferreds sold to the Treasury under TARP. The Treasury has even sold the associated BAC Warrants on the NYSE. The government has NO stake in BAC. You must be thinking Citibank. Or maybe GMAC aka Ally Bank.
And there is no US Bank with as many assets or liabilities as BAC. None could swallow BAC without a massive injection from the FDIC ... or more likely the Treasury.
And no bank would just "assume the preferred" without some huge incentive. What possible motivation would some other bank have to make such a bone-headed move? The only time stuff like that happens is when the bank is actually able to sell itself before the OCC steps in and puts it into receivership.
If you're going to seriously invest in junior bank securities, you need to do your homework. If BAC gets taken over, this issue is probably toast.
- Joel (Who's still holds a big chunk of CFC-PB and other BAC junior obligations.)
Let's see if I follow, BAC did guarantee the preferred from Countrywide, did they not. Let’s hope that nothing happens to BAC because many of us will be hurt. We are not millionaires but people that have tried to save for our old age. However if the government gets involved remember GM and their bonds, which I also held.