New York: Bank of America has proposed to
repay part of the US government bailout money, while the US is
pressing the bank to pay at least USD 500 million to defer a
tentative agreement that would have the government share its
losses on certain assets, says a media report.
"Bank of America Corp is offering to repay part of its
bailout money, and the US is pushing for the bank to pay at
least USD 500 million to shelve a tentative pact that
would have had the government share its losses on certain
assets," The Wall Street Journal said.
According to the move, both relate to an extra measure of
federal aid given to help BofA complete its acquisition of
Merrill Lynch. Both sets of discussions, if completed, would
enable BofA to reduce a layer of federal involvement in its
affairs, the report said attributing to people familiar with
the matter.
However, the bank is not offering to repay all of its USD
45 billion in aid from the Troubled Asset Relief Program,
(TARP) as several other banks have done, the report noted.
"Instead, BofA is suggesting it could start with the USD
20 billion of additional aid supplied in January when the
bank was hesitating to complete its takeover of loss-ridden
Merrill," it added.
The daily said the repayment of money would mean that
BofA would no longer be considered an "exceptional" aid
recipient-- a designation that has put it under lens by the
Congress and regulators, with its pay packages subject to
review by the Treasury.
In addition to giving BofA extra TARP money, the
government agreed in January to absorb a chunk of losses on a
USD 118-billion pool of assets owned by BofA and Merrill.
The bank would be on the hook for the first USD 10 billion in
losses and the US would cover 90 per cent of the remainder.
In exchange, the report noted that the bank would issue
to the Treasury USD 4 billion in preferred stock carrying an
8 per cent dividend, costing the bank about USD 320 million
a year. BofA also would pay the Federal Reserve USD 236
dollars.
The Treasury and the Federal Reserve are asking the bank
to pay between USD 300 million and USD 500 million to end this
plan and are pushing executives to consider a number on the
high end of that spectrum, the report said citing a person
close to the situation.
Bureau Report
First Published: Tuesday, September 01, 2009, 20:48