BofA Takes Another $20B Bailout on $10B Merrill Loss

Crippled by unforeseen losses and falling stock price, B of A puts its hand out. Again.

By Clay Dillow,  Newser Staff

Posted Jan 16, 2009 7:01 AM CST

(Newser) – Bank of America, sucker-punched by unforeseen losses from its takeover of Merrill Lynch, received another injection of $20 billion from the Treasury, the Wall Street Journal reports, bringing the total cost of BofA’s bailout to $45 billion. BofA’s shares shed 40% of their value in the past seven trading sessions, leaving the bank worth $4.2 billion less than the value of shares originally offered for Merrill.

Merrill described the impending losses as “market related,” and it was hemorrhaging throughout the fourth quarter on scores of credit-related products. When BofA found out, both the Fed and Treasury urged it to complete the deal anyhow, exposing BofA to losses up to $10 billion. The bailout will draw on the first half of the $700 billion TARP fund, and includes a Treasury backstop on $118 billion in BofA assets.

In this Nov. 25, 2008 file photo Pedestrians walk through New York's Times Square under a glowing Bank of America marquee.
In this Nov. 25, 2008 file photo Pedestrians walk through New York's Times Square under a glowing Bank of America marquee.   (AP Photo/Craig Ruttle, file)
In this Sept. 15, 2008 file photo, Merrill Lynch Chairman and CEO John Thain, left, smiles as Bank of America Chairman and CEO Ken Lewis, speaks at a news conference in New York.
In this Sept. 15, 2008 file photo, Merrill Lynch Chairman and CEO John Thain, left, smiles as Bank of America Chairman and CEO Ken Lewis, speaks at a news conference in New York.   (AP Photo/Craig Ruttle, file)
In this Sept. 15, 2008 file photo, traffic passes a branch of the Bank of America in New York.
In this Sept. 15, 2008 file photo, traffic passes a branch of the Bank of America in New York.   (AP Photo/Mark Lennihan, File)
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We actually thought Merrill Lynch's capital structure was very good and had a lot more of a base of common equity than some others we had seen, so it looks good.
- BoA CEO Ken Lewis on the Merrill deal last fall

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