Bank of America gets fresh bail-out

By John Hill on January 16, 2009 11:22 AM |

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Bank of America has been bailed out once again by the US government as it struggles with the losses it inherited from recent acquisition Merrill Lynch.

The treasury confirmed it will guarantee $118billion (£80.8billion) in loans and inject $20billion (£13.3billion) into the company.

The announcement comes just months after it handed over $15billion to Bank of America and $10billion to Merrill to battle the market meltdown.

The Canada Square-based financial giant struck a £27.9billion deal for the Wall Street bank in September, but has since needed assistance to guarantee losses it took on as a result. The merger was rubber-stamped on New Year's Day, but BoA announced 35,000 job cuts worldwide in December, citing the merger and the "weak economic environment".

The treasury confirmed it would be taking preferred shares in BoA as part of its "commitment to support financial market stability".

It said: "The objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security."

America's government agreed its biggest bail-out back in November, rescuing Citigroup with $306billion (£205billion) in guarantees and a $20billion injection. And it indicated its willingness to continue to use taxpayer money to prop up the ailing financial system.

It said: "The US government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks."