From the WSJ:
The U.S. government has agreed to commit billions in additional aid to Bank of America Corp. to help the nation’s largest bank by assets close its acquisition of Merrill Lynch & Co., according to people familiar with the situation.
Discussions over these funds began in mid-December when Bank of America approached the Treasury Department. The bank, already the recipient of $25 billion in committed federal rescue funds, said that it was unlikely to complete its purchase of the ailing Wall Street securities firm because of Merrill’s larger-than-expected losses in the fourth quarter, according to a person familiar with the talks.
Treasury, concerned the deal’s failure could affect the stability of U.S. financial markets, agreed to work with the Charlotte, N.C., lender on the “formulation of a plan” that includes new capital from the $700 billion Troubled Asset Relief Program, according to the person familiar with the talks. The terms are still being finalized, this person said. Details are expected to be announced with Bank of America’s fourth-quarter earnings, due out Jan. 20.
Any possible arrangement might protect Bank of America from losses on Merrill’s bad assets. There would be a cap on the amount of losses the bank would have to absorb, with the federal government being on the hook for the remainder, said one person familiar with the matter.
BoA bought the subprime lender Countrywide too, and this new infusion of money following the initial slug sounds abit like BoA going down the CitiBank path.