U.S. Government Provides Assistance Package to Bank of America
Bank of America will receive a new financial assistance package from the Treasury Department, the Federal Reserve and the FDIC. Specifically, the Treasury Department and the FDIC will provide guarantees for a $118 billion asset pool of loans, securities back by residential and commercial real estate loans, and other assets, the majority of which Bank of America assumed during the Merrill Lynch acquisition. In return, Bank of America will issue preferred shares to both the Treasury Department and the FDIC. Additionally, the Federal Reserve has agreed to issue a non-recourse loan to Bank of America if needed.
The Treasury Department will also inject $20 billion in capital into Bank of America in exchange for preferred stock, an action taken through the Targeted Investment Program, which is part of TARP. Lastly, the FDIC announced it will propose a Temporary Liquidity Guarantee Program rule change to extend the guarantees' maturity from three to ten years in cases where the debt is backed by collateral and the transaction aids new consumer lending. Click here for the press release, and click here for the term sheet.
