When Bank of America (NYSE: BAC) repaid its TARP borrowings a year ago, the event was hailed a milestone in the bank's bid to return to financial health. A year later, it is close to satisfying the final requirement imposed on its TARP exit: raising $3 billion via asset sales, which the Federal Reserve insisted on. The deadline is the end of 2010, and the bank seems on the brink of meeting the requirement.

Bank officials are increasingly confident they will meet the deadline and have told the Fed that recent sales of Blackrock shares and its stake in China Construction Bank have moved it close to the threshold, the Financial Times reports. Through September, the bank had sold more than $10 billion in assets, racking up capital gains of nearly $2 billion.

If it can't meet the requirement, Bank of America will have to sell additional common shares to boost equity. And the bank has apparently decided it can do that best via equity grants as part of employee compensation packages.

My sense is that the bank will likely be found in compliance. But it remains unclear whether it will be allowed to hike dividends. To do so, Bank of America will have to pass another round of stress tests--during a tough time for the bank. The threat of additional putback requests, the stalled foreclosure process and a cut in card revenue streams could make regulators nervous enough to want to go slow, especially as the economy muddles along. 

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