Good News from BofA: Another Bailout Ends

Sep.22.09 | About: Bank of (BAC)

For $425 million, Bank of America (NYSE:BAC) has canceled its loss-share agreement.

From WSJ:

Bank of America Corp. has agreed to pay $425 million to shelve a tentative loss-sharing pact designed to help the bank digest securities firm Merrill Lynch & Co., according to a person familiar with the situation…

When the pact was announced in January, officials said it would cover $118 billion in assets, with about 75% of the total from Merrill and 25% from Bank of America. But the bank and government never signed a final contract amid disagreement about what it could cover, and Bank of America said in May that it wanted out…

The U.S. government asked the bank to pay an exit fee, but Bank of America balked at the idea, saying its positions had never actually been covered. Regulators argued the bank benefited from the implied protection.

The most visible bailout measures may be disappearing — think TARP — but other, larger bailouts remain in place. I’m thinking in particular of the Fed’s emergency lending facilities as well as very aggressive monetary stimulus designed to prop up asset prices and protect bank balance sheets.