Treasury Guarantee of Bank of America Assets
Date:
January 16, 2009
Policy Area:
Financial Sector Policy
Economic Target:
Financial Institutions
Action Type:
Government Guarantee
Maximum Amount:
$7.50 billion
Deficit Impact:
-$2.50 billion Part of multi-agency government guarantee of approximately $118 billion in Bank of America assets, most of which it acquired through the purchase of investment bank Merrill Lynch. Under the terms of the agreement, Bank of America is responsible for the first $10 billion in losses on the assets. Remaining losses are divided 90/10 between the government and Bank of America. For the next $10 billion in losses, the Treasury (through the Troubled Asset Relief Program) and FDIC split the government’s 90% share with the Treasury covering up to $7.5 billion and FDIC covering up to $2.5 billion. 90% of the remaining losses are covered by the Federal Reserve through a non-recourse loan.
See the companion guarantess of Bank of America assets by the Fed and FDIC.
Notes:
Maximum amount figure represents Treasury's share of total assets under guarantee. Deficit impact based on amount spent.
Deficit impact is derived from CBO's estimated subsidy cost for the Treasury (TARP-funded) portion of the Bank of America asset guarantees (-$1 billion), as listed in CBO's January 2010 baseline.