Frank Ahrens
The Washington Post
January 15, 2009

The Treasury Department plans to invest billions of dollars in Bank of America to help the company absorb troubled investment bank Merrill Lynch, according to two people familiar with the matter, The Post’s Binyamin Appelbaum reports.

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The new investment, which is expected to be announced next week, is in addition to $25 billion the government already has invested in Bank of America, including $10 billion specifically in connection with the Merrill Lynch deal.

Losses at Merrill Lynch have outpaced expectations since the deal was announced in September. Bank of America had enough capital to support its own operations, but not enough to absorb Merrill Lynch’s losses, the sources said.

The banks closed the deal on Jan. 1 after Treasury committed to making the new investment.

Bank of America and Treasury declined to comment.

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