In a conference call with investors this morning, Bank of America chief executive Ken Lewis said his company, which announced its first quarterly loss in 17 years, considered last month canceling its planned purchase of Merrill-Lynch as Merrill's losses mounted at the end of the quarter.
The losses presented Bank of America with a "dilemma." The bank evaluated its rights to cancel the deal, which didn't close until Jan. 1, but Treasury and Federal Reserve officials urged the bank to go forward, expressing concerns about the impact on the financial system, Lewis said. The government promised assistance if the bank needed it.
On Thursday, the federal government agreed to give Bank of America $20 billion in emergency funds and to guarantee the losses from certain of its assets.
Lewis said his team had correctly identified problem assets at Merrill when they agreed last September to take over the ailing brokerage firm, but didn't anticipate the extent of the firm's losses in the second part of December. "Frankly, most anybody in the capital markets business would have forecast a lower loss rate than what we saw," Lewis said.
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