- The Washington Times - Friday, January 16, 2009

From combined dispatches

The federal government is considering a fresh multibillion-dollar aid package for Bank of America Corp. to help it absorb losses at Merrill Lynch.

A person with knowledge of the discussions said Thursday the new aid package could be modeled along the lines of the $25 billion financial lifeline thrown to Citigroup Inc. in November.

Shares of Bank of America dropped 18 percent Thursday, losing $1.88 to close at $8.32 after hitting $7.35, its lowest point since February 1991.

In the Citigroup rescue, the bank received a fresh $20 billion capital infusion from Treasury’s bailout fund — after earlier receiving $25 billion — as well as government backing of billions in risky assets held by the bank.

Bank of America could get another capital infusion from the government, and possibly secure government guarantees against losses on problem loans.

A fresh capital injection could come from the Treasury Department’s $700 billion bailout pot, while any money that might be put up for loan guarantees could come from a mix of government sources.

Bank of America has received a total of $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, or TARP. That includes $10 billion for Merrill Lynch & Co., which Bank of America bought in a deal that closed Jan. 1.

“It gets down to the cost of the acquisition of Merrill and the risks associated with the deal,” said Gary Townsend, president of Chevy Chase private investment group Hill-Townsend Capital.

Any possible arrangement might protect Bank of America from losses on Merrill’s bad assets, he said.

Meanwhile, one of the nation’s largest labor unions announced a campaign Thursday accusing Bank of America of taking taxpayer money while continuing to stiff consumers with unethical business practices the union said were responsible for the economic collapse.

Bank of America is the first in a series of targets for the Service Employees International Union, which says the economic strife has created an opening to pressure companies to change the way they do business.

“Business needs to admit it failed,” said Andy Stern, president of SEIU, which claims about 2 million members and which has set aside $10 million for its “Change that works” campaign to push for changes to health care, pensions and corporate governance.

The union would not list future targets, though officials said they plan to go after various sectors of the economy.

Stephen Lerner, special assistant to Mr. Stern, said Bank of America was a logical first target because one out of every two households in the U.S. deals with the bank for a mortgage, credit card or other transaction.

Bank of America reports its fourth-quarter and annual results Tuesday. Some analysts are predicting the nation’s biggest bank by assets to report a loss or lower-than-expected earnings for the fourth quarter.

Its board has already halved the company’s dividend and could cut it again.

• Staff writer Stephen Dinan contributed to this article.


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