US Injects More Public Money Into Bank Of America

Tom Burroughes

16 January 2009

The US government has agreed to invest $20 billion more public funds in Bank of America and guarantee $118 billion of its assets to help the bank absorb Merrill Lynch, as had been anticipated, according to media reports.

The government agreed to the rescue “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp said in a joint statement shortly after midnight in Washington DC.

BoA, meanwhile, was due to issue fourth-quarter and full-year results for 2008 today at 7am EST.

The government’s latest action shows financial markets are still uncertain about whether the US government has done enough to protect the banking system, even after using $350 billion of public money and after the Federal Reserve has slashed interest rates and pumped money into the system.

The US already had injected $15 billion into Bank of America, the country’s biggest lender, and another $10 billion to Merrill to bolster the combined company against the global credit crunch.

BoA’s acquisition of Merrill Lynch, completed at the start of January, will create a firm with about 20,000 financial advisors, one of the largest wealth management operations in the world.