"Too big to fail" Bank of America gets government bailout

16 January 2009

The US government has moved to bailout the country's biggest bank, Bank of America (BoA), with a package that will see it injected with $20 billion in fresh capital and receive guarantees for approximately $118 billion of potential losses linked to toxic assets.

In a statement, the agencies administering the rescue package - the Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation - said the protection was necessary because of the possibility of "unusually large losses" linked to mortgage-backed securities and other assets acquired by BoA as part of its takeover of the brokerage Merrill Lynch.

The money is in addition to the $25 billion pumped into the bank in October through the Trouble Asset Relief Program and makes BoA the second-biggest recipient of federal aid since the credit crisis began behind Citigroup, Reuters reports.

Both BoA and Citi are expected to report quarterly results later today after bringing their publication forward to head off further speculation amount the extent of the damage caused by credit losses.

Doug Kass of Seabreeze Partners Management had previously said both banks could become fully nationalized, as they are "too big to fail".

BoA has over 59 million customers in the US.



Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development