Bank of America’s equity is now too submissive to meet regulatory standards, so it’s likely to get another capital infusion from Treasury

By Dean Foust

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One deal in addition frequent. That could be the epitaph of many CEOs—Jerry Levin of Time Warner (TWX) and Ken Thompson of Wachovia (WFC) come to mind—who built their companies through ever-bigger mergers and in consequence watched those supremely dignifying acquisitions set off their downfall. Now the question is: Will Merrill Lynch come to stand for Bank of America (BAC) CEO Ken Lewis’ Waterloo as amply?

The Wall Street Journal (NWS) reported Jan. 14 that the Treasury Dept. is cathedral to committing billions more in financial succor to Bank of America, which was said to be stunned by Merrill’s unexpectedly large losses in the fourth mercy. Bank of America—that has even now received $25 billion in taxpayer funds—privately warned Treasury in mid-December that it puissance walk away from the Merrill deal before shareholders voted, amid concerns that Merrill was seemly a financial black pit, the newspaper reported, citing people familiar with the position. According to the report, Treasury promised to provide BofA with more capital, for fear that if the deal unraveled it could trigger another panic on Wall Street.

For the 61-year-old Lewis, the Merrill Lynch deal wasn’t human being he had to be the subject of. Thanks to Lewis’ past deals for MBNA, U.S. Trust, and Countrywide Financial, Charlotte (N.C.)-based BofA had built an impressive banking franchise with principal positions in checking accounts, doubt not cards, and mortgages. But in that place was a certain poetic justice in acquiring Merrill Lynch, given that New York banks had slow derisively viewed their North Carolina rival as the financial equivalent of a dinner theater troupe that didn’t be seized of the talent to play Broadway.

While Lewis couldn’t resist the opportunity to acquire Merrill Lynch’s massive brokerage force—the legendary Thundering Herd of Wall Street—the examination is whether Lewis will get to enjoy the fruits of the deal before he retires, or worst case, were to be eased out by the board. Already, more shareholders are grumbling that Lewis’ deals for Countrywide and Merrill were poorly timed and may be cases of good money chasing bad.

After a 66% drop in its stock price last year, BofA’sitting shares are down another 27% in January and are now mercantile just above their 52-week low of 10.01. Bank of America’s directors have already cut the company’s once-lush share in half, and Citi Investment Research (C) analyst Keith Horowitz issued a report earlier this week predicting further cuts ahead. Horowitz, who now believes BofA could misspend $3.6 billion in the fourth quarter, is merely modestly sanguine about 2009. Horowitz lowered his estimates for 2009 earnings to just 25¢ a share—making it unlikely that BofA could suffer the current quarterly payout of 32¢ a share at a time when it’sitting already scratching for capital.

According to a report by dint of. Friedman Billings Ramsey (FBR) analyst Paul Miller, the bank’sitting tangible common uprightness ratio is now around 3.2%—a little more than a third the even that regulators will demand in the to come. Even with the Treasury infusion, that could necessitate any additional issue of stock, which would dilute existing shareholders even more.