Business | Economy
Bank of America eyes more public funds
Bank of America (BoA), the largest US bank, is close to getting billions of dollars more in federal support from taxpayers, a person familiar with the matter said.
- Reuters
- Published: 23:51 January 15, 2009
Washington/New York: Bank of America (BoA), the largest US bank, is close to getting billions of dollars more in federal support from taxpayers, a person familiar with the matter said.
As Congress debated the future of the government's $700-billion financial markets rescue programme, the source said that BoA has struggled to digest its January 1 buyout of former Wall Street brokerage giant Merrill Lynch.
Merrill's fourth quarter losses exceeded expectations and spurred BoA in mid-December to start talking to the US Treasury Department, which is managing the bailout.
US Treasury Secretary Henry Paulson was driving the talks out of concern that BoA might be unable to complete the buyout, cutting Merrill adrift, the Wall Street Journal reported yesterday.
The size and terms of any aid that could result are still being finalised, with details expected to be announced with BoA's fourth-quarter earnings, due out January 20.
In after-hours trading, BoA's shares dropped more than five per cent to the lowest level since 1991. During Wednesday's trading session, BoA shares dropped 4.2 per cent to $10.20, down 28 per cent so far this year.
BoA declined to comment. The White House declined to comment on the original report in the Journal, as did a US Treasury spokeswoman.
The news came as President-elect Barack Obama pressured Congress to release a second installment of $350 billion for the bailout programme known as the Troubled Asset Relief Programme (TARP). It was first approved in October.
Treasury has already committed $350 billion under the TARP, largely to shore up the balance sheets of large banks, but critics say the banking industry remains in desperate straits.
"The first round of TARP didn't give [Bank of America] the ability to build tangible equity, as well as fund Merrill Lynch, as well as handle loan losses and get rid of the problems on their balance sheets," said Christopher Marinac, an analyst at FIG Partners in Atlanta.
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