Business

Bank of America gets another $20B

Bank of America will get another $20 billion from the U.S. government's bailout fund, with federal guarantees for another $118 billion in mortgage-backed securities on its balance sheets, the Treasury Department announced early Friday

The new arrangement provides additional capital for Bank of America in exchange for preferred stock with an 8 percent dividend, the Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation announced in a joint statement.

Bank of America has agreed to restrictions on executive pay and will be expected to adjust mortgages for troubled borrowers.

The FDIC will also extend its temporary loan guarantee program, which insures some debt beyond current limits, in exchange for expanded lending to consumers, senior government officials told reporters in a midnight briefing on the plan.

The deal also provides a backstop in case of "unusually large losses" on assets backed by real-estate loans. Most are being absorbed by Bank of America in its buyout of brokerage house Merrill Lynch, a $50 billion acquisition in the works since September. The assets will remain on the company's books, the feds said.

The $20 billion in funds from the Troubled Assets Relief Program (TARP) -- the $700 billion bailout fund created by Congress in October -- should be transferred to Bank of America later Friday, according to one of the officials. They did not say whether other troubled banks will need similar assistance.

"Each time we do one of these, we hope it's the last one we will ever have to do," one said.

Bank of America's shares fell 18.4 percent Thursday and have tumbled 36 percent so far this week. The company declined to comment.

Bank of America, which has already received $15 billion in government capital, including $10 billion set aside for Merrill Lynch, reportedly first approached the Treasury Department for help last month as losses mounted at the failing Wall Street firm. Government officials agreed to step in to avoid the merger's collapse, which would further roil the financial system.

The purchase, which was announced hours before Lehman Brothers filed for bankruptcy in mid-September, closed January 1.

Merrill Lynch's losses could top $10 billion, the Journal reported.

The deal would mark the second time the federal government has had to step in again to prop up a faltering financial institution. In November, officials injected another $20 billion into Citigroup, which had already received $25 billion, and agreed to backstop more than $300 billion in troubled assets.