http://www.bloomberg.com/news/2011-1...bank-unit.html
Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.
The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people.
RED ALERT: Biggest Bank Sweetheart Deals of All Time?
First case in point: the astonishing (and so far mostly unnoticed) little slight-of-hand that Bank of America pulled when it switched over its Merrill Lynch-derived toxic assets to a federally insured program. Read this and weep: Bank of America is moving $75 trillion of highly risky derivative contracts "from its Merrill Lynch unit to a subsidiary flush with insured deposits." The FDIC, which is the government agency that insures bank deposits, is screaming bloody murder, but the Federal Reserve wants to let them do it.
http://www.huffingtonpost.com/mike-l...comm_ref=false
IIRC, BoA was "forced" by Treasury to eat M-L. That's probably some leverage BofA has here vs recalctrant FDIC.
American taxpayers, and FDIC, are being setup by the Fed and Treasury (part of the financial 1% club) for another multi-$T bailout.
Where are the tea baggers dissenting against the financial sector? They've gotten very quiet after they elected the VRWC's candidates to Congress. Tea baggers are a total fraud (and the "sincere" ones are stupid, ignorant dupes).
Last edited by boutons_deux; 10-22-2011 at 09:45 AM.
Banks are good pepople. - Mitt "The " Romney
Is Bank of America Headed for the Glue Factory?
according to Bloomberg, “the transfers (of derivatives) are being requested by counterparties.” Well, how do you like that? In other words, the investors on the other side of these contracts want Merrill to put them under an insurance umbrella provided by the FDIC.
“The GAO detailed instance after instance of top executives of corporations and financial ins utions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves….
“The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose ‘reputational risks’ to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates ‘an appearance of a conflict of interest,’ the report added….
Joseph Stiglitz – former head economist at the World Bank and a Nobel-prize winner – said yesterday that the very structure of the Federal Reserve system is so fraught with conflicts that it is ‘corrupt’ and undermines democracy.
Stiglitz said, ‘If we [i.e. the World Bank] had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.’”
“This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositories pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario…..This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.”
Bank analyst Christopher Whalen at Reuters thinks that the transfer could be a sign that B of A is getting ready to throw in the towel. Here’s an excerpt from the article:
“…. the move to put the derivatives exposures of Merrill Lynch under the lead bank could be preparatory to a Chapter 11 filing by the parent company. The move by Fannie Mae to take a large junk of loans out of BAC, the efforts to integrate parts of Merrill Lynch into the bank units earlier this year, and now the wholesale shift of derivatives exposure all suggest a larger agenda.
“I don’t have any access to inside skinny, but what I see suggests to this investment banker that a restructuring may impend at Bank of America.” (“Is Bank of America planning for a Chapter 11″, Reuters)
http://www.counterpunch.org/2011/10/...-factory/print
=======
Bankruptcy would mean not only that BoA/M-L has raped taxpayers with incredible risk (risk becomes $100Bs taxpayers loss if BoA goes bankrupt, but that stockholders would be wiped out.)
So the Fed is protecting the BoA capitalists/investors(counterparties) by assuring that FDIC (taxpayers) cover their losses.
Capitalists' loss, taxpayers payout
And Yoni STILL blames, as the VRWC propaganda machine dictates, that the financial crisis and Banksters' Great Jobs Depression on CRA and F&F, while denying that many $10Ts of derivatives even exist.
Last edited by boutons_deux; 10-23-2011 at 11:44 AM.
Which Bank Is the Worst for America? 5 Behemoths That Hold Our Political System Hostage
the five, from winner down:
Citigroup
JP Morgan Chase
Bank of America
Goldman Sachs
Wells Fargo
http://www.alternet.org/module/printversion/152686
The banks were stupid to pay back the TARP funds as quickly as they did. They were too greedy, not wanting to pay the govt their share of the profits, and now they're too weak to survive, at least some of them.
The problem isn't the bank's stupidity, it's that of their shareholders not minding their companies' board activity. The TARP was paid back on time because failure to do so would have meant the officers and board-members would have endured govt. claw-backs on their salaries/bonuses.
The bank management was very intelligent from the perspective of self-interest even if their actions on behalf of the bank's financial health could be construed as stupid. That's a major problem with Wall St. in a nuts : management is strip-mining companies for personal gain instead of being ethical stewards of their companies, and the Dodd-Frank is too toothless to effectively protect consumers.
"shareholders not minding their companies' board activity."
what crap. CEOs put in friendly board members. Stockholders have almost no control, and exercise little power. All the stockholders (capitalists) care about is dividends and stock price rises, no matter how the company produces them.
"Dodd-Frank is too toothless to effectively protect consumers"
because the graph above shows how the finance sector spent $Ms de-toothing D-F, just like BigPharma and BigInsurance spent $Ms screwing up ACA.
Right, and I described a situation in which bank execs and boards are making stock prices fall while enriching themselves -- behavior that rightly pisses off stockholders, and should have done so years ago were they even slightly vigilant and organized.
It's a given that many of these corrupted exec/BODs are criminal based on their actions thus far, and it's also a given that laws and regulation will protect/favor corporations with lobbyists long before they protect that corporation's individual stockholders... I'm not arguing that. I'm asking who is ultimately at fault if not the "stockholders (capitalists)"? If they don't care how their money is spent, who else is left to?
If people spent more time learning about the companies they invested in instead of looking at puffed-up performance stats on e-trade and/or assuming they can "set and forget" their investments, we wouldn't be in this mess. Stockholders ceded most of their oversight because decades of prosperity lulled them into the assumption that they would get a good ROI no matter what, but it hasn't always been this way, and it won't always be this way.
Potentially good news, however he is not the boss; in a position to be kept quiet. I remember reading about him in '09. Refreshing.
(Barry should have fired the Repug asshole (in fact ALL Repug appointees) at OCC who the Repugs used to block 19 states (including Spitzer whom the Repugs took down for going after Wall St) from going after predator lenders. The Repugs were directly responsible for permitting and extending the sub-prime mortgage scam, not CRA, F&F)
And yet the banks overwhelmingly backed Democrats in campaign donations on the last few go-arounds.
Dying for some strict regulatory activity, no doubt.
"you mad at the wrong people. Blame yourself" - GOP candidates
Financial and other sectors were simply buying the influence of the more and very probable winner, and they obtained it. They'll bribe whomever, Dem or Repug, that they think will have the power.
So you see why getting all partisan about it is beside the point, I expect.
"false equivalence"
Repugs have pushed hard for VRWC strategy (cut taxes, war on employees, kill regulations) all along, since 1975.
Repugs screwed up ACA obtained all kinds of compromises, then voted against it.
Repugs gutted Dodd-Frank
Repugs gutted CFPB
Repugs blocked Liz Warren
Repugs are trying to kill paid sick leave nationwide.
Repugs says banks are over regulated
Repugs plan to kill Medicare and SocSec
Repugs plan to kill EPA, and defund the IRS.
What where are the Dems in the above pushes? nowhere
The counterparties to the derivatives are getting skittish.Moody’s Downgrade
The Moody’s downgrade spurred some of Merrill’s partners to ask that contracts be moved to the retail unit, which has a higher credit rating, according to people familiar with the transactions. Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody’s decision, said a person familiar with the matter.
Interesting.
I would say let them do it, but charge them some VERY hefty FDIC premium hikes, enough to make it felt come executive bonus time.
Hoenig also called for breaking up America’s biggest banks. Hoenig has contended they have an unfair funding edge over smaller lenders precisely because the 2008 economic downturn showed policymakers don’t have the stomach to let them go under.
Predictably, smaller financial ins utions are sympathetic to his outlook.
“Our economy in the U.S. would be drastically different if we had five big banks and no community banks,” said Linda Hanson, the regional president for Enterprise Bank & Trust in Kansas City. “It’s important for our country to sponsor entrepreneurship.”
Read more: http://www.kansascity.com/2011/10/21...#ixzz1biammS00
Interesting. Too bad he isn't the chairman...
Repugs will kill any such move to break up the TBTF, even if they are all technically bankrupt, even after unloading $1T+ toxic obligation to Geithner.
Bingo.
I strongly suspect that managment of large companies work more to protect their own interests, to the detriment of the stockholders. Getting a rein in on executive pay that distorts objectives would be a good start to fixing that.
" ethical stewards of their companies"
where in the employment contract or in the corp's articles of incorporation is there ANYTHING about ethics or morals?
where are the owners (stockholding capitalists) demanding a corp be ethical or moral? all they want is stock price rises and dividends.
Last edited by boutons_deux; 10-24-2011 at 12:06 PM.
They need to ban stock options as compensation. Go to performance incentives instead and make the corporations put in their annual statements "we just gave the CEO a 40 million dollar bonus".
lookout for the bailout
and the management rewards themselves with bonuses and wage increases for doing nothing
"They need to ban stock options as compensation."
aka government intervention and regulation of private enterprise. won't EVER happen
Last edited by boutons_deux; 10-24-2011 at 12:20 PM.
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