Bank of America gets $20 billion rescue
The government is giving Bank of America a $20 billion rescue package for losses incurred by the acquisition of Merrill Lynch, which the Feds encouraged the bank to buy. The bank reported its first quarterly loss in 17 years. Jeremy Hobson reports.
A Bank of America ATM branch in New York City (Mario Tama/Getty Images)
More on Investing, America's Financial Crisis
TEXT OF STORY
Scott Jagow: Sorry, but this bank situation just keeps getting more perplexing. This morning, the government said it's giving Bank of America another $20 billion. And here's why: Last fall, the Feds encouraged B of A to buy Merrill Lynch. Bank of America was doing just fine at the time. Now it's not. Today, B of A reported its first quarterly loss in 17 years, and cut its dividend to one penny. More now from Marketplace's Jeremy Hobson.
Jeremy Hobson: Bank of America CEO Ken Lewis says most of the problem lies with Merrill Lynch's fourth-quarter loss of more than $15 billion. The acquisition of Merrill came not long after B of A acquired the troubled mortgage lender Countrywide.
Lewis defended the moves in a conference call this morning:
Ken Lewis: Our acquisitions of both Countrywide and Merrill Lynch were directed at strengthening the franchise, but also contributed to marketplace stability.
Still, Christopher Whalen of Institutional Risk Analytics says Lewis may be having second thoughts about those deals today.
Christopher Lewis: If Ken Lewis had somehow held back and not bought Countrywide and not agreed to this Merrill Lynch deal, he'd be sitting pretty. BA would be the most solid stable of the three largest banks.
Bank of America's stock is up this morning, off of its lowest level in almost two decades.
In New York, I'm Jeremy Hobson for Marketplace.
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01/16/2009
I find it amazing that no questions are asked or discussions take place as billions are given out to banks while for automakers - they are grilled and made naked infront of audience. Even though TARP was for financial rescue, given that the money has been used for questionable purposes and billions is yet to show any effects, should we not step back and ask questions, impose stringent conditions before handing out additional billions in the middle of night to banks and financial institutions. Viva Capitalism!
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