(Reuters) - The U.S. Treasury said on Friday it would draw on the government’s $700 billion financial rescue fund to buy $20 billion in preferred shares of Bank of America Corp to help the bank absorb Merrill Lynch & Co.
The capital injection is part of a larger plan by the Treasury, U.S. Federal Reserve and Federal Deposit Insurance Corp to backstop $118 billion in bad assets held by the bank, which has already received $25 billion from the fund.
The Treasury has already disbursed $271.7 billion from the so-called Troubled Asset Relief Program (TARP) to shore up the banking system and faltering U.S. automakers, and billions more have been pledged for particular uses.
Congress approved the program in early October, but it initially granted Treasury access to only half the funds.
However, the Senate on Thursday voted down a resolution that would have blocked access to the remaining $350 billion, freeing up the funds for U.S. President-elect Barack Obama, who takes office on Tuesday.
Following is an outline of what has been spent or pledged from the funds so far:
— $250 billion pledged for purchases of senior preferred shares and warrants in banks and thrifts.
In a report on transactions through January 9, the Treasury said it had completed equity purchases totaling $192.3 billion in 257 institutions under this portion of the program.
— $20 billion pledged for Bank of America, in addition to $25 billion for the bank already disbursed under the $250 billion plan to shore up bank capital.
— $40 billion investment in troubled insurer American International Group.
— $20 billion investment in Citigroup.
— $19.4 billion to prop up the U.S. auto industry. The amount includes $10.4 billion in loans to General Motors Corp, including $1 billion for GM to help its financing affiliate GMAC reorganize as a bank holding company; a $4 billion loan for Chrysler LLC; and a $5 billion direct investment in GMAC. GM could qualify for a further $4 billion loan in March.
— $5 billion pledged to cover potential losses on a $306 billion portfolio of Citigroup mortgage-related assets.
— $20 billion pledged to cover potential losses for a Federal Reserve program aimed at improving consumer access to credit.