Turn On The Lights, Watch The Roaches Scatter Part 76

If you thought Bank of America was out of the woods after their deal with Warren Buffet for $5 billion, it seems the financial giant is still in need of liquid capital as it has sold its stake in China's Construction Bank for another $8.3 billion.

A group of investors is buying 13.1 billion CCB shares from Bank of America, with the deal expected to close in the third quarter. The U.S. bank declined to name the investors but two sources said Singapore state fund Temasek was among the buyers.

Bank of America needs to boost capital by some $50 billion in the coming years to meet new global rules, according to multiple analyst estimates.

CCB is the second-largest bank by market value in the world, and Bank of America's ties with the Chinese bank are seen as an important source of future growth, particularly as economic growth in the United States is likely to be tepid for now.

Bank of America's willingness to sell part of its CCB investment as soon as it was contractually able to shows how far it must go to meet new capital requirements, analysts said.

"Bank of America's decision to sell that stake is wrong strategically in the long run, but they need money," said Josef Schuster, founder of Chicago-based IPO research and investment house IPOX Schuster.

It looks very much like the company's stock price is still a major concern, trading at just uder $12 a share in June to fall off a cliff and hit the $6 mark...a 50% drop, mind you, last week.  It's up above $8 as a result of this deal and the deal with Buffett, but that may not last.

The larger concern of course is the fact the bank was sued by AIG for $10 billion earlier this month for foreclosure fraud.  That opened the floodgates and Bank of America has been struggling ever since, rapidly trying to come up with fresh capital in any way possible.

The even bigger concern is that the bank is leveraged to the hilt anyway, so the change in stock price has all but floored it.  And the Fed doesn't seem particularly eager to help out very much.

And the largest concern?  The bank's settlement with states is now being objected to by the FDIC.  The company now has a sword of Damocles the size of tens of billions hanging over it, because if you think AIG is the only company that will file suit after the settlement deal collapses, well you've not been paying attention to the other 75 posts in the Fraudclosuregate series here.

Hell of a ride shaping up here.