WASHINGTON — Bank of America reached an agreement early today for an additional $20 billion in support from the government’s emergency bailout fund, plus guarantees against losses on up to $118 billion in troubled assets.
The agreement, following marathon negotiations between the bank and federal officials, marks the latest effort by the Bush administration to bolster the banking system in the face of the worst financial crisis since the Great Depression.
The $20 billion injection of fresh capital will come from the government’s $700 billion rescue fund and will be similar to assistance provided in November to another troubled bank, Citigroup.
Bank of America will use the money from the bailout to help it absorb losses at Merrill Lynch, an acquisition that closed this year.
The Treasury Department already has pledged the first half of the $700 billion bailout fund, which Congress approved Oct. 3, to deal with the nation’s financial crisis.
However, President George W. Bush, on behalf of President-elect Barack Obama, asked Congress to release the second half of the bailout fund earlier this week, and Thursday the Senate voted 52-42 to turn aside an attempt by opponents to block the release of the remaining $350 billion.
Before the new support package, BofA had received $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, including $10 billion for Merrill Lynch.
Even with the government aid, Bank of America’s stock has been pummeled. Shares are down more than 27 percent this year and lost $1.80, or 17.5 percent, to $8.40 in late-afternoon trading Thursday after trading as low as $7.35 earlier in the session.
Rival Citigroup’s shares plunged 87 cents, or 19.5 percent, to $3.66 after falling as low as $3.36 earlier in the session.
