Bank of America (BoA) could receive an additional bailout of billions of dollars to stave off the impact of Merrill Lynch’s fourth-quarter losses, after the closure of a deal between the two banks.

The bank said in September that it would pay $50 billion in shares for Merrill Lynch, the Wall Street bank that was struggling with huge credit-related losses. The deal saved Merrill from the same fate as Lehman Brothers, which went bust on the day the takeover was announced.

However, BoA is thought to have warned the US Treasury in December that it would not close the deal because of the danger from Merrill’s larger-than-expected fourth-quarter losses.

Desperate for the transaction to go through, the Treasury is believed to have agreed to protect BoA from Merrill’s losses, possibly via a cap on the amount of red ink that the bank would have to absorb because the Government stepped in to take responsibility for the remainder.

BoA took ownership of Merrill on January 1.

BoA has already received $25 billion from the Government’s $700 billion Troubled Assets Relief Programme (Tarp), including $10 billion that Merrill would have received had their deal not gone through.

The details of the rescue plan have not been finalised but are expected to be announced when the bank reveals its fourth-quarter figures on January 20.

It is not clear how large Merrill’s losses for the last three months of the year will be, while analysts are divided over whether BoA will report a loss or a smaller-than-expected profit.

BoA yesterday declined to comment on the possibility of a further bailout.

The Treasury has used the first half of the Tarp and the President-elect, Barack Obama, has asked Congress for access to the remaining $350 billion.

But lawmakers are reluctant to release the cash without guarantees that it will be used to help homeowners and give a boost to the economy.

Taxpayers have been angered by the paucity of strings attached to the handout of the first $350 billion, while the banking sector has refused to account for how it spent the cash.

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