CHARLOTTE (AP) — The federal government is considering a fresh multibillion-dollar aid package for Bank of America Corp. to help it absorb losses at Merrill Lynch.

A person with knowledge of the discussions said yesterday the new aid package could be modelled along the lines of the financial lifeline that was thrown to Citigroup Inc. in November. The person spoke on condition of anonymity because of the sensitive nature of the discussions.

Shares of Bank of America plummeted 14 percent in afternoon trading.

Bank of America could get another capital infusion from the government, and possibly secure government guarantees against losses on problem loans. A fresh capital injection could come from the Treasury Department's $700 billion bailout pot, while any money that might be put up for loan guarantees could come from a mix of government sources.

The Treasury Department already has pledged the first half of the bailout pot. Some money, however, hasn't actually been allocated. President-elect Barack Obama pleaded with Congress this week to release the second $350 billion of the bailout funds.

Bank of America has received a total of $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, or TARP. That includes $10 billion for Merrill Lynch & Co., which Bank of America bought in a deal that closed January 1.

"It gets down to the cost of the acquisition of Merrill and the risks associated with the deal," said Gary Townsend, president of Maryland-based private investment group Hill-Townsend Capital. "They were obviously in contact and in discussion with the Treasury prior to the end of year close."

Any possible arrangement might protect Bank of America from losses on Merrill's bad assets, he added.

Even with the government aid, Bank of America's stock has been pummeled.

Shares of the Charlotte-based bank are down more than 27 percent this year — dropping to their lowest level in 18 years — and lost $1.48, or 14.4 percent, to $8.73 in afternoon trading yesterday after trading as low as $7.35 earlier in the session. Rival Citigroup's shares plunged 43 cents, or 9.5 percent, to $4.10 after falling as low as $3.36 earlier in the session.

Bank of America, which reports its fourth-quarter and annual results on Tuesday, declined comment about a new aid package yesterday. The Wall Street Journal late Wednesday reported that the government was nearing a new deal with Bank of America, and said details of the aid are expected to be announced with earnings next week.

Some analysts are predicting the nation's biggest bank by assets to report a loss or lower-than-expected earnings for the fourth quarter.

Its board has already halved the company's dividend and could slash the payout again.

"We don't know how they are going to be," said Bert Ely, a banking industry consultant in Alexandria, Virginia. "The question is, can they handle the recognition of the committed losses, however bad they are going to be, if they are there."

Analysts polled by Thomson Reuters, on average, expect Bank of America to earn eight cents per share during the quarter and $1.15 per share for 2008.

Fears about the stability of the financial industry has again gripped Wall Street in recent days, sending stocks plunging. Wall Street investors are worried about another round of losses from banks, which had been especially hard hit by the worst financial crisis since the 1930s.

Against that backdrop, the federal government has taken radical steps — including making capital injections in banks — to shore up the nation's shaky financial system and to try to get credit flowing more freely again. Problems, however, have persisted. Federal Reserve Chairman Ben Bernanke earlier this week made a forceful case that the second $350 billion bailout instalment was critically needed.

In the Citigroup rescue late last year, the bank received a fresh $20 billion capital infusion from Treasury's bailout fund — after earlier receiving $25 billion — as well as government backing of billions in risky assets held by the bank.