Friday, January 16, 2009

Bank of America gets big government bailout

WASHINGTON/NEW YORK (Reuters) – Bank of America Corp was rescued by the U.S. government on Friday through a $20 billion bailout and a guarantee for almost $100 billion of potential losses on toxic assets to cushion the blow from a deteriorating balance sheet at Merrill Lynch & Co, its recently acquired brokerage.

The bailout makes Bank of America the biggest recipient of taxpayer money next to Citigroup as the government pours cash into the nation's banks to plug holes left by bad loans. The worst housing crisis since the Great Depression and the worst recession in many years have hammered U.S. banks.

The capital is on top of $25 billion that Bank of America previously got from the Treasury Department's Troubled Asset Relief Program (TARP) in October and is the latest indication that authorities are still struggling to come to grips with the financial crisis that began about 18 months ago.

In another bid to shore up banks in general, the government's Federal Deposit Insurance Corp. said it would propose lengthening the term on bank debt that it is prepared to guarantee to 10 years from three years. Banks must use the proceeds for new consumer lending.

No comments: