The US government agreed late Thursday to invest $20bn more in Bank of America and backstop $118bn of its assets to help the lender absorb Merrill Lynch and prevent the financial crisis from deepening, reports Bloomberg on Friday. The government agreed to the rescue “as part of its commitment to support financial market stability, the US Treasury, Fed, and FDIC said in a joint statement. Earlier, reports the FT,  the Senate voted 52-42 to release  $350bn in bail-out funds, the second half of the $700bn Tarp scheme enacted in October, after intensive lobbying from Barack Obama’s transition team. Under the proposed deal, BofA would absorb the first losses on the toxic assets, with subsequent losses being borne first by the Treasury, then by the FDIC and then by the Fed. It emerged Wednesday that BofA last month had sought extra government aid to offset rising losses by Merrill Lynch, which it acquired this month.

This entry was posted by Gwen Robinson on Friday, January 16th, 2009 at 5:52 and is filed under Capital markets. Tagged with BofA. Edit this entry.