Bank of America receives $20 billion in state help
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The US Treasury Department announced a 20-billion-dollar help package for Bank of America, which has been struggling since its acquisition of Merrill Lynch on January 1. The state is to receive preferred stock of the bank in exchange.
AFP - Bank of America will receive 20 billion dollars in fresh capital and a 118-billion-dollar asset guarantee program to help shore it up after acquiring Merrill Lynch, the US Treasury Department announced early Friday.
The Treasury said in a joint statement with the Federal Deposit Insurance Corporation that it "will invest 20 billion dollars" in BofA from the Troubled Assets Relief Program (TARP) "in exchange for preferred stock with an 8 percent dividend to the Treasury."
The Treasury and the FDIC will also "provide protection against the possibility of unusually large losses on an asset pool of approximately 118 billion dollars of loans, securities backed by residential and commercial real estate loans, and other such assets, all of which have been marked to current market value," the statement read.
Bank of America has already received 25 billion dollars (19 billion euros) in capital injections from the TARP, a US financial bailout fund that helped rescue mostly banks reeling from financial turmoil triggered by a home mortgage meltdown.
That included 10 billion dollars for the brokerage firm Merrill Lynch, which Bank of America bought in a deal that closed January 1.
In return for the aid, Bank of America must meet strict restrictions on executive pay and compensations, and implement a mortgage loan modification program.
"The objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security," Treasury said.
The announcement came just hours ahead of the bank's release Friday of its fourth-quarter earnings.
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