Bank of America is paying the US government $425m (£262m) to scrap a key provision of its bailout arrangements, the latest major bank to return cash to taxpayers. The payment marks the end of a $118bn guarantee which the US Treasury signed with BofA in January, when losses from its investment banking subsidiary Merrill Lynch threatened to bankrupt the whole company.
The Treasury agreed that taxpayers would help shoulder the burden of Merrill's losses, should they increase, but the guarantee was never formally implemented and never had to be called upon. BofA had originally proposed that the scheme be dropped without any compensation to the government, but the Treasury secretary Tim Geithner insisted on a payment.
The problems thrown up by the acquisition of Merrill Lynch are far from over, however, and the BofA board was yesterday discussing its options should chief executive Ken Lewis be charged with misleading shareholders over details of the takeover last December.Reuse content