Bank Of America To Get Billions More In Bailout Funds From Treasury
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NEW YORK — The U.S. government is nearing a deal to inject Bank of America Corp. with billions of dollars in more aid, The Wall Street Journal reported late Wednesday, citing people familiar with the situation.
The nation's biggest bank by assets acquired Merrill Lynch & Co. on Jan. 1. Bank of America received $25 billion from the government's $700 financial rescue fund, including $10 billion that would have gone to Merrill had it not been acquired.
Bank of America and the U.S. Treasury spokesmen declined to comment in response to inquiries made by The Associated Press.
The Journal, citing a person familiar with the talks, reported that the discussion between the government and Bank of America began in mid-December when the Charlotte, N.C., bank said it wasn't likely to go through with its acquisition of New York-based Merrill because the losses at the troubled company were larger than expected.
Treasury Department officials grew concerned that the stability of the U.S. financial markets would be at risk if the deal fell apart, the newspaper reported. Officials said they would work on "formulation of a plan" that includes new money from the government, the Journal said, citing the person familiar with the talks.
Details of a possible agreement, the Journal said, are likely to come out with the company's quarterly results, which are expected Tuesday.
The Journal reported that any possible plan could shield Bank of America from the bad assets on Merrill's books. One person familiar with the situation told the paper that there could be a limit to how much Bank of America might have to be liable for, with the government covering the remainder.
Banks are struggling to mend their balance sheets after bad bets on mortgages spread to other forms of debt. Some analysts and economist are saying the U.S. government will have to spend far more than the $700 billion it has already approved to aid the financial industry. Only the first half of the $700 billion has been allocated and Congress has not released the second half of the funds.
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01/14/09 11:57 PM ET Associated Press