Bank of America says aid request 'mistake'

NEW YORK - Bank of America's chief executive is now calling his request for US$20 billion ($40.4 billion) in government money to support the acquisition of Merrill Lynch a "tactical mistake", a news report says.

Ken Lewis also said he would stay on as chief until the bank paid back its US$45 billion in government funding - which could take two or three years, the Financial Times reported.

Bank of America spokesmen did not immediately return calls for comment.

The news came as Bank of America's shares plunged US41c, or 10 per cent, to US$3.55. On February 20, shares hit a 26-year low of US$2.53.

Lewis told the Financial Times that taking US$20 billion from the Government in January made Bank of America appear as weak as Citigroup.

He took it because he wanted "a cushion" of capital as his company absorbed the ailing investment bank Merrill Lynch but he should have requested US$10 billion instead.

Bank of America and Citigroup have each received US$45 billion in government funding and both reported losses in the fourth quarter.

But Bank of America's US$2.39 billion loss was its first quarterly shortfall since the crisis began. Citigroup, on the other hand, has reported five straight quarters of losses adding up to more than US$28 billion.

Citigroup also got a large portion of its government investment converted to common stock last week.

Citigroup's stock hit an all-time low yesterday, trading as low as US$1.15 a share.

Citigroup and Bank of America are among the 20 banks the Government will "stress test" to decide if they have sufficient capital to survive sharply deteriorating economic conditions. The tests are expected to be completed by the end of April.

In addition to its uncertain financial health, Bank of America has come under scrutiny after Merrill Lynch executives received US$3.6 billion in year-end bonuses.

Merrill Lynch was not technically part of Bank of America until January but the New York attorney-general is trying to find out the names of the executives receiving payouts.

- AP