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NEW YORK: Bank of America said on Monday that it had agreed to pay 425 million US dollars to the US government to exit a guarantee programme put in place to cover potential losses in its takeover of Merrill Lynch.
"We are pleased to resolve this matter and move forward," Kenneth Lewis, chief executive and president of Bank of America Corporation, said in a statement.
The agreement ends a government guarantee of up to 118 billion US dollars in assets that authorities offered to pave the way for Bank of America's acquisition of Merrill Lynch in January 2009.
BofA had considered pulling out of the government-orchestrated takeover after learning of Merrill's heavy losses.
Under the pressure of authorities, Lewis completed the takeover, and the US Treasury raised its aid to the bank from the Troubled Asset Relief Programme to 45 billion US dollars from 25 billion US dollars.
In addition to the 45 billion taxpayer dollars from the TARP, the US government also agreed to guarantee 90 per cent of any losses on a 118-billion-dollar pool of risky assets owned by the bank and Merrill Lynch. It was this guarantee that the bank and the government agreed to terminate Monday.
Lewis has publicly chafed at the government intervention that accompanies the public aid.
In its statement Monday, the bank recalled that it has taken several steps toward reducing its reliance on government support and return to normal market funding, notably by raising capital and issuing 10 billion US dollars in bonds that are not backed by the government.
The biggest US bank by assets also underscored that the government had not converted the preferred shares it received in exchange for the TARP funds to common stock.
"We are a stronger company than we were even a few months ago, and while we continue to face challenges from rising credit costs, we believe we have all the pieces in place to emerge from this current economic crisis as one of the leading financial services firms in the world," Lewis said.
The announcement was made after the New York Stock Exchange closed. BofA shares edged up 0.06 per cent in electronic trading to 17.26 US dollars, less than half its value a year ago.
- AFP/sc
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