Over the last decade, through an aggressive series of acquisitions, Bank of America has transformed itself from a regional institution into the nation's largest brokerage house and consumer banking franchise. But its largest and boldest move -- the September 2008 purchase of Merrill Lynch, when that famed brokerage house was at death's door -- may have been a deal too far. On Jan. 14, 2009, the Treasury announced that it was injecting $20 billion into Bank of America (on top of $25 billion it received in the financial system bailout) and pledging to absorb as much as $98 billion in losses on toxic mortgage assets that Merrill brought with it.
The Merrill Lynch deal drew heavy criticism, and in April 2009 shareholders voted to strip the bank's chief executive, Kenneth D. Lewis, of his title as chairman of the board -- a stinging blow that leaves his stewardship and legacy in doubt. The board said that it still unanimously supported Mr. Lewis in his role as chief executive.
In May 2009 the government told Bank of America that its so-called stress test indicated that the bank would need to raise $33.9 billion in new capital to withstand any worsening of the economic downturn. If the bank is unable to raise the capital cushion by selling assets or stock it would have to rely on the government, possibly converting converting non-voting preferred shares it gave the government into common stock. Such a move could make the government one of the bank's largest shareholders.
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