BANK OWNED BY AMERICA; FEDS BECOME LARGEST SHAREHOLDER...

NEW YORK (CNNMoney.com) — Bank of America has received another $20 billion from the federal government’s bailout fund, along with guarantees on $118 billion of assets at the bank, to absorb its recent purchase of the ailing Merrill Lynch.

Details of the deal were announced by the government in the early hours of Friday.

The new arrangement provides additional capital for Bank of America (BAC, Fortune 500) in exchange for preferred stock with an 8% dividend, according to a joint statement by the Treasury Department and the Federal Reserve.

The Treasury will extend $20 billion more to the bank under the $700 billion Troubled Asset Relief Program. The funding will come from the TARP Targeted Investment Program, not the subset $250 billion Capital Investment Program designed to prop up healthy banks’ balance sheets.

The bailout deal also provides a $118 billion backstop from the Fed in case of “unusually large losses” on assets backed by real-estate loans, most of which are being absorbed by Bank of America in its buyout of brokerage house Merrill Lynch. Bank of America will pay 3.7% of those assets as a fee for the backstop, and is responsible for the first $10 billion of losses and 10% of the remaining losses.