Bank of America Ready to Repay $20B in Bailout Cash

But bank haggles with Treasury, Fed over fee for loss-sharing deal
By Jason Farago,  Newser Staff
Posted Sep 1, 2009 7:59 AM CDT
A customer uses a Bank of America ATM in Charlotte, N.C.   (AP Photo/Chuck Burton, file)
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(Newser) – Bank of America may become the latest institution to pay back a portion of its bailout money, with an eye toward escaping Washington's scrutiny of its pay packages. BofA isn't ready to pay back $45 billion in first-round TARP funds, the Wall Street Journal reports, but wants to start with $20 billion tacked on in January to help push through the shotgun takeover of Merrill Lynch. However, a special loss-sharing deal between BofA and the government may complicate matters.

In return for the $20 billion in extra cash and a federal commitment to absorb 90% of the bank's losses over a certain level, BofA agreed to give stock to the Treasury. The deal specified that if BofA wanted out, it would have to pay an "appropriate fee"—and the Treasury and Fed now say they want as much as $500 million, if not more. The bank originally refused to pay up, but has since relented and is trying to find a "middle ground."