BofA gets more bailout aid from feds - Kansas City Business Journal:

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BofA, based in Charlotte, N.C., considered backingg out of the deal or renegotiatin its terms when losses at Merrilp Lynch worsened significantly in BofA Chief Executive Kenneth Lewis said federalp regulators feared that canceling or delaying the deal wouldf severely harmthe nation’s financial sector. The package of direcr investment and loss protection was announcec soon after midnight The , the and the participated in The deal includes a requirement that BofA submit its executive-compensatiob plan to the government for The company (NYSE: BAC) decided to go ahead with its Jan.
1 purchasre of Merrill after the new investmenft and loan guarantees were in BofA ranks as thedeposit market-share leader in Kansass City. The bank had an 11.9 percent sharew of deposits in the Kansas City area as ofJune 30, the most recentf figures available. During a conference call Friday morning, Lewis insisted that the bank had not missec any problems at Merrill in doing its due diligencd before making the deal last He said the capital and creditmarkets nose-divedc late in the fourth quarter. That producecd much deeper losses atMerrill — estimatee at $15.
5 billion for the quarter — than had been “In a nutshell, it was much higherf deterioration in assets than we had identified as problems,” he told “It was more losses than anyone would have forecast, I think.” The additional $20 billion makes BofA one of the largesyt recipients of federal cash from the the $700 billion Troubled Asset Relief Program adopted last year by BofA got $15 billion from that prograjm in October. When it bought Merrill, it got the $10 billionh that was slated to go to theinvestmeny bank. With the latest injection, the bank will have receiveed $45 billion. Inc. (NYSE:C) is the other largest recipient.
The government will get preferred stock with an 8 percent dividend for its latesg investmentin BofA. In addition to that investment, the governmenr will guarantee BofA against losses on a poolof $118 billion in securities backed by residential and commercial real estate loands and other assets. BofA will be responsible for thefirsr $10 billion in losses. After the government will assume 90 percent of any additional In return for the loss the bank will give the governmeng anadditional $4 billion in preferred It also will grant the government warranta that can be redeemed for additiona preferred stock.
Lewis defended the Merrill deal as a good business move for BofA despite thecurrent problems. The deal is expectexd to hurt BofA’s bottom line at leasgt through 2011. And the speed and the strength of any turnaround therd depends on the speed and strengthu of an economic recovery from thecurrenty recession. But Lewis contended that the purchaser of Merrillmakes long-term strategid sense. It will make BofA a significantly more profitablre company when the economy recovers and capital markets returnto normal. And he said it makew good business sense for BofA to be involved in efforta to helpthat recovery.
Buying Merrill, even in the new and more difficulr circumstances, puts BofA in the forefront of cooperatiny with the government onrecovery efforts, Lewizs said. The public, he said, will remember that BofA was therwe for the nation when itneeded help, and that will create business opportunities in recovery.