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NEW YORK (Reuters) – Bank of America Corp (BAC.N) shares fell below $5 for the first time since 1990 and declined for a fifth straight day on concern the government might nationalize the largest U.S. bank and wipe out shareholders.

Shares fell 12 percent as reports persisted that spiraling losses on mortgages and corporate loans might lead to government control of the Charlotte, North Carolina lender. Bank of America and newly acquired Merrill Lynch & Co ended 2008 with $2.49 trillion of assets.

"Until we get some clarity that even the largest banks will remain in shareholder hands, this downward spiral is just going to continue," said Nancy Bush, an analyst with NAB Research.

In late afternoon trading, Bank of America shares were down 63 cents at $4.67. The cost of protecting the bank's debt against default with credit default swaps rose 0.3 of a percentage point.

According to the Charlotte Observer, Chief Executive Kenneth Lewis in a memo to employees said the bank's board "unanimously" supported Bank of America's business model last week in "the longest board meeting in anyone's memory." He also acknowledged employees' disappointment about lowered bonus payouts.

Scott Silvestri, a bank spokesman, declined to comment.

Bank of America last month posted its first quarterly loss in 17 years, and said Merrill's $15.31 billion quarterly loss was so much worse than expected that Lewis needed help from the government to complete the acquisition.

The government, which had already given Bank of America $25 billion in October under the Troubled Asset Relief Program (TARP), agreed to inject $20 billion more, and to share in losses on $118 billion of residential and commercial mortgages, derivatives and corporate debt.

"This Merrill Lynch deal has become a fiasco for Ken Lewis," said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon. "His whole reason for grabbing Merrill Lynch was getting the brokers, and what he ended up with was gigantic writedowns from the part of the business he didn't even want."

Lewis had coveted Merrill for its brokerage force, often known as the "thundering herd," and which he called the "crown jewel" of the roughly $19.4 billion takeover.

Through Tuesday, Bank of America shares had fallen 62 percent this year, compared to a 38 percent decline in the broader KBW Banks Index (.BKX).

Shares in Citigroup Inc (C.N), which has also received a large cash injection and a government guarantee of assets, were up as much as 10 percent at $3.82 before falling back to $3.47 in late afternoon trading.