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Fighting to repay its debt from funds borrowed through the Troubled Asset Relief Program (TARP) in 2008, Bank of America (Stock Quote: BAC) is taking a novel approach to raising the $3 billion it needs by the end of December. It’s taking cash away from employee bonuses, and replacing them with company stock.

According to a report from Bloomberg, the TARP debt has forced the bank’s hand.

It still owes $1.1 billion of the $3 billion it agreed to repay by the end of 2010 when it received the TARP loan. Overall, the bank received $45 billion in TARP funds.

Clouding the bank’s books is the amount of money it has lost so far due to its role in the foreclosure robo-signing scandal. While Bank of America is back in the foreclosure business in 23 states, after a brief moratorium to clean up its foreclosure financial documentation process, the bank has taken a financial hit on the foreclosures it has not closed out in recent weeks.

With the calendar closing in on Bank of America, bank officials now view stock payouts as a way to save cash, thus giving it more liquidity to pay back its TARP debt on time. It’s not like Bank of America is cutting employees short – Bloomberg estimates that the bank will give out 10% more in bonus compensation than it did in 2009.

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About 284,000 global employees would be affected by the shift in bonus compensation. The bank has already put aside $26.3 billion for employee compensation in 2010 (it has approximately $72 billion in revenues right now). But the bank says it hasn’t calculated official bonus payouts, although some financial websites have rough estimates in mind.

One of those sites is, whose unofficial estimates peg the average teller bonus at $633 per year, and the average bonus for a vice-president at $21,907.
The good news for employees is that bonuses would be immediately vestable, meaning they could sell the stock right away. The stock is currently trading at about $12 a share, down almost 18% at a time when the Standard & Poor’s 500 average is at a two-year high (up 9.9%). Analysts say that the upside is good, and that could mean big profits for employees if the bank’s stock rises significantly.

The bank has tried this tactic before. In 2009, Bank of America issued $1.7 billion in stock compensation to employees in lieu of annual bonuses.

It looks like it’s going to the well once again, with employee approval dependent on one key point: Will the BofA’s stock rise or fall?

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