Jan. 16 (Bloomberg) — Bank of America Corp., the largest U.S. bank by assets, received a $138 billion emergency lifeline from the government to support its acquisition of Merrill Lynch & Co. and prevent the global financial crisis from deepening.
The U.S. government agreed to invest $20 billion more in Bank of America and guarantee $118 billion of assets “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.
The bailout may increase pressure on Chief Executive Officer Kenneth D. Lewis, who reports fourth-quarter results today, to defend his decision to buy the ailing Merrill. Lewis overreached by rescuing two money-losing firms in six months, including New York-based Merrill and Calabasas, California-based Countrywide Financial Corp., said analysts including Paul Miller of Friedman Billings Ramsey Group Inc.
“This thing is unraveling so fast that he may know his job is lost,” Miller said.
Bank of America spokesman Robert Stickler said the firm doesn’t comment on “uninformed gossip.”
Shares of Bank of America plunged 18 percent yesterday, sliding $1.88 to $8.32 in New York Stock Exchange composite trading after hitting $7.35, its lowest level since February 1991. The bank moved up its fourth-quarter report to today at 7 a.m. New York time.
‘Fire-Fighting Tactics’
“The motivation is to try and basically get information to the market sooner rather than later because of all the anxiety that’s out there,” said Bert Ely, chief executive officer of Ely & Co., a bank consulting firm in Alexandria, Virginia. It’s a “very tense situation now,” he said.
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