Report: Bank of America wants more U.S. financial help
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Bank of America Corp. wants more government aid to cushion against expected losses at brokerage Merrill Lynch & Co., which the banking giant bought Jan. 1, the Wall Street Journal is reporting on its website.
The news may further darken the mood on Wall Street, which today suffered its worst decline since Dec. 1 in part on renewed worries about the health of the financial system.
From the Journal:
The government is close to committing billions in additional aid to Bank of America Corp. as the nation’s largest bank by assets tries to digest its Jan. 1 acquisition of Merrill Lynch & Co., according to people familiar with the situation. The discussion began in mid-December when Bank of America, already the recipient of $25 billion in federal rescue funds, told the U.S. Treasury Department it was unlikely to complete its purchase of the ailing Wall Street securities firm because of Merrill’s larger-than-expected losses in the fourth quarter, according to a person familiar with the talks. Treasury, concerned the deal’s failure could affect the stability of U.S. financial markets, agreed to work with the Charlotte, N.C. lender on the ‘formulation of a plan’ that includes new government capital. The terms are still being finalized, this person said, and details are expected to be announced with Bank of America’s fourth-quarter earnings, due Jan. 20.
Bank of America shares have fallen to $9.70 in after-hours trading. They dropped 45 cents to $10.20 in regular trading, a new bear market closing low, and are down 27% just since Dec. 31.
Federal Reserve Chairman Ben S. Bernanke warned on Tuesday that the banking system overall still was seriously troubled and would require more government assistance.
For Bank of America, the need for another capital infusion because of Merrill’s troubles is likely to deepen shareholder fears that Chief Executive Ken Lewis overreached with the deal, which was announced in September. That followed the bank’s purchase of wounded mortgage lender Countrywide Financial in June.
Then again, given the risk that Merrill might have failed if left on its own, Lewis was doing the Treasury a favor.
-- Tom Petruno