By my recollection of the 8-K, they didn’t issue convertible preferred stock, but rather plain-old perpetual preferred stock plus some deep out-of-the-money warrants. But even if they did issue convertible preferred stock, how can they force conversion? Conversion is a right of the holder (i.e. Treasury). Sure, some converts have call options that, when the stock price exceeds the the conversion price, are effectively force-conversion options. But this requires two things: a) that the preferreds are callable and b) that the conversion option is in-the-money. Are either true? I thought the preferreds shares (i.e. TARP monies) were only repayable after 3 years, and only then conditional on being repaid with proceeds from a qualified equity issuance. Am I misremembering the terms of the TARP purchases?

It’s worth noting that the NYT got snowjob’d today. Not only did they report the Alphin quotes without checking whether they made any sense, they themselves reported this:

“The government’s determination that Bank of America doesn’t need as much capital as it has already received from taxpayers is an indication that even some of the most troubled banks may not need more government money than has been allocated to them.”

This is spinning bad news good and is not very good reporting.