Bank of America getting extra $20B in bailout funds

The structure is similar to the deal the government struck in November with Citigroup. Citi received $20 billion on top of its first bailout of $25 billion, and also issued the government rights to buy 188.5 million shares. The government also agreed to shoulder losses on $306 billion of the bank's riskiest loans, after Citi covered the first $29 billion in losses.

However, questions remain about Citi's ability to handle soaring credit losses. Earlier this week, it sold a majority stake in its profitable brokerage division Smith Barney to Morgan Stanley. Citi's stock fell 15.45% to $3.83 on Thursday.

The government had been in negotiations with the bank for weeks as the severity of the problems at Merrill became clearer, said government officials, who spoke on condition of anonymity. They were not named because they were not authorized to speak about the deal publicly. Members of president-elect Barack Obama's administration were notified of the negotiations, the officials said.

The funds for the $20 billion loan will come from the first half of the $700 billion Troubled Asset Relief Program passed by Congress last year to bolster the financial sector. The Senate voted to release the second half of the TARP money to the Obama administration Thursday. BofA should receive the $20 billion Friday, the government officials said.

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