Froggy sent this along with the following note:
This is a big story. B of A has moved $53 Trillion in its Merrill Lynch derivatives from a holding company onto the FDIC INSURED balance sheet which is backed by about $1 Trillion in deposits following a credit downgrade. This is a potential massive FDIC depositor bailout of epic proportions, and basically a desperate move by the bank to avoid the potential Dodd Frank wind down. In other words, “Don’t fuck with us or we’ll blow a cool Trillion in deposits, bitch.”
This is very, very ugly.
Those of you with some knowledge of finance, please expand, so that the rest of us can be suitably freaked out.
fight fight fight housing is a human right
Link
BOA is in a real mess. But this is some frightening stuff.
5 point 3 or Fifty-three? Because $53,000,000,000,000.00 sounds like an opening bid in Fizban.
[…] “Not With A Bang, But A Whimper: Bank Of America’s Death Rattle”Jeff G.Wed, 19 Oct 2011 23:00:02 GMT Like this:LikeBe the first to like this post. […]
I don’t know a lot about the financial sector, but I’m ready to start freaking out whenever someone gives the word.
Ah-hem! to expand: This is a “if I go down, I’m taking you all with me” move.
Hey, you said “Those of you with ‘some’ financial knowledge”, not “those of you that know what they’re talking about”.
An I know how many nickles in a dollar…
This is the tip of the iceburg. During the housing boom, banks were doing $3 trillion a year in home loans — but they were then selling derivatives and credit swaps based on those loans to the tune of $50-60 trillion during the bubble, a lovely side-effect of fractional reserve banking. Because the feds and the Fed made sure that housing never collapsed and banks never collapsed, all of that bad debt and busted CDOs and etc are still out there and still on the books. BofA, Citi, Wells Fargo … there is literally not enough money in the entire world to pay off the debts they owe each other. Option A is simply to let all the big banks fail — since they mainly owe the money to each other, it would be a nasty but contained collapse. Like Fukushima! I feel, though, that the feds and the Fed are going to go with Option B, and that is bad.
I’ll be working at a bank (not BoA) until mid-November, when my contract ends.
That’s all I know.
Maybe BoA, et al, should try hiring a few Ivys.
What’s option B Ella?
your tax dollars at work
FTFY.
Slightly OT, BOA nuance-slapped OWSers and their lefty supporters, and in doing so annoyed various dirty socialists.
Ella sounds like she knows more about this than me, but I think option B is pretend and extend – never admit the losses, keep propping up the zombie banks, lose a decade or a generation.
almost feels like anyone who has an upside down home loan with BofA should probably walk away
A 53:1 ratio isn’t good. Isn’t the norm 10:1?
Calling Mr. Howard!
Looks to me as if a bank started in San Francisco and currently based in North Carolina has learned how to play Chicago-style.
Rich guys contributing to Obama is like taking a hit out on themselves.
A lengthy piece from Durden.
Etc.
Option B is BofAs creditors get first dibs on whatever assets the bank holding company retains after it fails, followed by an FDIC bail-out to make depositors whole. They’re pissing in their own cornflakes and daring anyone to eat them, I guess you could say.
Also, somewhere in there is a run on banks and of likely bank failures that makes the Great Depression look like a cake-walk.
Reuters reports that Qaddafi (or however you spell his name) is now dirtnapping.
Glenn Reynolds this morning highlighted this bit from tigerhawk:
So it looks to me like B of A is making sure that, now that they’ve been captured, the regulators dare’nt let go.
A = L + E.
http://www.investopedia.com/terms/m/marktomarket.asp
Banks are required to hold a certain amount of equity in order to conduct their operations, that is, to lend money.
What happens to a bank’s equity position is suddenly contracted due to a requirement to disclose the actual value of its equity?
Think European banks holding Greek debt. What is the value of that debt? Do you take it at face value, or do you adjust the actual value of that debt under the accounting rules of Mark to Market?
BofA has just put a gun to its own head. Didn’t this happen in “Blazing Saddles”?
.
TMI, everyone holding real estate investments has been lying about their actual value.
If every bank and more than a few corporations actually marked to market the value of their real estate holdings, they’d be instantly insolvent/bankrupt.
I used to have some simple criteria when investing in the stock market. I looked at debt to equity and price to earnings.
Price to earnings for a lot of stocks is way out of whack, and even if the p/e is okay, I cannot trust the debt to equity statement, simply because I don’t know if the claimed equity is a now worthless piece of real estate.
Silly bumpkin. According to a prominent Harvard man, you should use a “profit and earnings ratio” instead. How do you expect to understand this modern economy without the right mathematical tools?