Bank of America to pay back federal aid
22 Sep 2009
Bank of America (BOA) which had received two bailouts from the US government is moving to get out of Washington's grip even as BOA chief Kenneth D Lewis tries to smooth relations with regulators.
With the financial industry recovering the giant bank announced a slew of measures on Monday to cut its reliance on federal aid. The moves are likely to be followed by a more comprehensive repayment effort that will repay the many billions of bailout dollars that propped the bank during the financial crisis.
But the uptick in fortunes came even as the bank's troubled acquisition of Merrill Lynch, a watershed moment of the financial crisis continued to make news in Washington and Wall Street. Bank of America on Monday failed to comply with a request by Representative Edolphus Towns, Democrat of New York, to reveal additional details of the deal, which is likely to snowball into a major controversy.
However, the uproar notwithstanding, BOA chief Kenneth D Lewis is moving swiftly to disentangle the bank from the federal bailout program and has offered the government $425 million for unused federal guarantees against losses at Merrill.
The payment would close a dispute over what the bank owes the US for a promise to help absorb losses on $118 billion of holdings, mostly at Merrill Lynch. The federal guarantee helped the bank stitch up a takeover of the New York-based brokerage after Q4 losses soared past $15 billion and while the deal was announced in January, an agreement was never entered into and the bank withheld payment.
Chief executive officer Kenneth D Lewis plans to reduce government's role in company affairs and paying the fee is part of a plan to reduce ''reliance on government support and return to normal market funding,'' according to the company's statement.
