At Least It's for a Good Cause…
Just in from Reuters:
U.S. close to giving BofA billions more aid: report
Wed Jan 14, 2009 6:25pm EST
NEW YORK (Reuters) – The U.S. government is close to pledging billions of dollars of additional aid to Bank of America Corp, the Wall Street Journal reported on Wednesday, making the bank the second to require a second round of emergency government assistance.
Bank of America is struggling to digest its January 1 acquisition of Merrill Lynch & Co, the newspaper said, citing people familiar with the situation. The bank’s shares dropped more than 5 percent after hours, reaching their lowest level since 1991.
Merrill Lynch’s losses in the fourth quarter were larger than expected, which spurred Bank of America to start talking to the U.S. Treasury in mid-December, the newspaper said. The terms of the government aid are still being finalized, and details are expected to be announced with Bank of America’s fourth-quarter earnings, due out January 20.
A possible deal would involve protecting Bank of America from Merrill’s bad assets by capping the bank’s potential losses from them.
The talks were driven by Treasury Secretary Hank Paulson, who was concerned that Bank of America would be unable to close the deal, possibly leaving Merrill Lynch without a partner.
Bank of America spokesman Scott Silvestri declined to comment. The White House declined comment on the report, as did the U.S. Treasury.
Merrill Lynch CEO John Thain negotiated the sale of the brokerage, which had been rocked by billions of dollars in toxic assets, to Bank of America in mid-September on the same weekend that Lehman Brothers Holdings Inc filed for bankruptcy protection.
Some analysts had seen the deal as a coup for Bank of America’s CEO Kenneth Lewis, who also used the bank’s relative strength to buy Countrywide Financial, formerly the nation’s largest mortgage lender, but the bank’s stock has since spiraled lower.
Bank of America shares fell 5.9 percent to $9.60 in electronic after-hours trading on Wednesday, its lowest level since December 1991. The bank has not traded below $10 a share since January 1992.
Bank of America and Merrill Lynch together received $25 billion from the Treasury’s Troubled Asset Relief program in October. Citigroup received the same amount in October, and another $20 billion of capital in November.
(Reporting by Dan Wilchins; Additional reporting by Matt Spetalnick in Washington; Editing by Gary Hill)