The Wolfs in sheeps clothing!

[lifewasgood]

Guys, I have said for a long time that unless we reform those said banks and brokerages, then we may become the next poor.

Nothing has changed since they fleeced America and until we reform the monetary system and eliminate or significantly reduce the power of the Federal Reserve, they will do it again.

[jarhead1976]

Warren Buffet to the rescue! Ha!

The Federal Reserve and Bank of America Initiate a Coup to Billions of Dollars of Losses on the American Taxpayer

Posted on October 18, 2011 by WashingtonsBlog

The Federal Reserve and Bank of America Initiate a Coup to Billions of Dollars of Losses on the American Taxpayer
Bloomberg reports that Bank of America is dumping derivatives onto a subsidiary which is insured by the government – i.e. taxpayers.

Yves Smith notes:

If you have any doubt that Bank of America is going down, this development should settle it …. Both [professor of economics and law, and former head S&L prosecutor] Bill Black (who I interviewed just now) and I see this as a desperate move by Bank of America’s management, a de facto admission that they know the bank is in serious trouble.

The short form via Bloomberg:

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…

Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

Now you would expect this move to be driven by adverse selection, that it, that BofA would move its WORST derivatives, that is, the ones that were riskiest or otherwise had high collateral posting requirements, to the sub. Bill Black confirmed that even though the details were sketchy, this is precisely what took place.

And remember, as we have indicated, there are some “derivatives” that should be eliminated, period. We’ve written repeatedly about credit default swaps, which have virtually no legitimate economic uses (no one was complaining about the illiquidity of corporate bonds prior to the introduction of CDS; this was not a perceived need among investors). They are an inherently defective product, since there is no way to margin adequately for “jump to default” risk and have the product be viable economically. CDS are systematically underpriced insurance, with insurers guaranteed to go bust periodically, as AIG and the monolines demonstrated. [Background.]

The reason that commentators like Chris Whalen were relatively sanguine about Bank of America likely becoming insolvent as a result of eventual mortgage and other litigation losses is that it would be a holding company bankruptcy. The operating units, most importantly, the banks, would not be affected and could be spun out to a new entity or sold. Shareholders would be wiped out and holding company creditors (most important, bondholders) would take a hit by having their debt haircut and partly converted to equity.

This changes the picture completely. 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 depositaries 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. [Background.] 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. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. 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.


The FDIC is understandably ripshit. Again from Bloomberg:

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. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Well OF COURSE BofA is gonna try to take the position this is kosher, but the FDIC can and must reject this brazen move. But this is a bit of a fait accompli,and I have NO doubt BofA and the craven, corrupt Fed will argue that moving the derivatives back will upset the markets. Well too bad, maybe it’s time banks learn they can no longer run roughshod over regulators. And if BofA is at that much risk that it can’t survive undoing this brazen move, that would seem to be prima facie evidence that a Dodd Frank resolution is in order.

Bill Black said that the Bloomberg editors toned down his remarks considerably. He said, “Any competent regulator would respond: “No, Hell NO!” It’s time that the public also say no, and loudly, to this new scheme to loot taxpayers and save a criminally destructive bank.

Professor Black provided a “bottom line” summary in a separate email:

1.The bank holding company (BAC) is moving troubled assets held by an entity not insured by the public (Merrill Lynch) to the Bank of America, which is insured by the public
2. The banking rules are designed to prevent that because they are designed to protect the FDIC insurance fund (which the Treasury guarantees)
3. Any marginally competent regulator would say “No, Hell NO!”
4. The Fed, reportedly, is saying “Sure, no worries” by allowing the sale of an affiliate’s troubled assets to B of A
5. This is a really good “natural experiment” that allows us to test whether the Fed is protects the public or the uninsured and systemically dangerous institutions (the bank holding companies (BHCs))
6. We are all shocked, shocked [sarcasm] that Bernanke responded to the experiment by choosing to protect the BHC at the expense of the public.

Karl Denninger writes:

So let’s see what we have here.

Bank customer initiates a swap position with Bank. In doing so they intentionally accept the credit risk of the institution they trade with.

Later they get antsy about perhaps not getting paid. Bank then shifts that risk to a place where people who deposited their money and had no part of this transaction wind up backstopping it.

This effectively makes the depositor the “guarantor” of the swap ex-post-facto.

That the regulators are allowing this is an outrage.

If you’re a Bank of America customer and continue to be one you deserve whatever you get down the line, whether it comes in the form of higher fees and costs assessed upon you or something worse.

Stand Up to the Coup
Bank of America has repeatedly become insolvent due to fraud and risky bets, and repeatedly been bailed out by the government and American people. The government and banks are engineering an age of permanent bailouts for this insolvent, criminal bank (and the other too big to fails). Remember, this is the same bank that is refusing to let people close their accounts.

This is yet another joint effort by Washington and Wall Street to screw the American people, and to trample on the rule of law.

The American people will be stuck in nightmare of a never-ending depression (yes, we are currently in a depression) and fascism (or socialism, if you prefer that term) unless we stand up to the overly-powerful Fed and the too big to fail banks.

[decoy409]

jarhead, that dumping will continue however with that dumping comes little choice to induce more QE. As if they do not,why that balloon deflates just like that!
I don't SEE the call quite readied for the cut off. We need a couple of justifiers. Millions more will have their homes on the chopping block of foreclosure land in the weeks ahead. And in those weeks ahead the old UC will be questioned once again as the 60 day plan runs out. Of course good old debt ceilings and americas unpaid bills has not been resolved as well.
60 days is a lot of time for things to really shape up say Iran way as that whole mess will be chaos.

Maybe one of the top questions that should be asked jarhead is about that old 'Bill of Rights' in which you and countless others fought to protect. My question would be,'Just what the heck is July 4th all about now?

[decoy409]

jarhead, still a good thread here you created. And things are very much on the same schedule.

[decoy409]

Say,this is a great topic!

As there certainly are the wolves around dressed up.

[frankq]

Funny.....I'm pretty sure that the government deemed home ownership a right instead of a priviledge to be earned, and created policy to that effect, not banks.....2 years later...we're still here...

[frankq]

And the meteor.......she's a coming.......

[sunrnr]

Mar 22, 2013 14:11:50 GMT -5 @wxyz said:

When?

Why, right on schedule of course! Don't you read "The NEWS"?

Hoot!Hoot!

[frankq]

Don't worry.......just click your heels together three times and keep saying...."there's no place like the cave....there's no place like the cave....

[Steady As She Goes]

No worries guys. I was reading an obscure NEWS item on a very reputable web-blog the other day where most major scientists suggested that DARPA and HAARP have combined forces with NASA to develop a new deflector array that'll keep those nasty meteors from causing any REAL damage. I'll post the link if I ever find it again.

[decoy409]

damnotagian, why you have a few wolfs in sheeps clothing trying hey.  

[mmhmm]

Damnotagain hasn't posted in this thread, decoy.

[decoy409]

Really?

[decoy409]

Why jarhead,that's a lovely entry above,#31 that is. Has a lot in common with the latest release.

[decoy409]

Of course these things certainly get buried quickly by the........

[frankq]

No worries guys. I was reading an obscure NEWS item on a very reputable web-blog the other day where most major scientists suggested that DARPA and HAARP have combined forces with NASA to develop a new deflector array that'll keep those nasty meteors from causing any REAL damage. I'll post the link if I ever find it again.

Thanks steady. Can you check if they've come up with a better way to block the electromagnetic Bilderberg radiation? Wrapping my head with tinfoil creates static on the car radio. My wife isn't digging the Tom Terriffic look either....Thanks.

[Aman A.K.A. Ahamburger]

Apr 3, 2013 12:30:03 GMT -5 decoy409 said:

Of course these things certainly get buried quickly by the........

What this issue here I missed it?  Can u explain please decoy? 

[Aman A.K.A. Ahamburger]

So I'm not going to get an explanation once again?  Does this have to do with robots?  It's so much easier to just pretend people don't answer questions then to face facts though I guess. 

[frankq]

Of course these things certainly get buried quickly by the........

I don't know what he's referring to either aham...

[Aman A.K.A. Ahamburger]

Must be something about how he's a long term evader, or something like that.. 

[frankq]

What the hell does frogs boiling and long term evader even mean?

[Aman A.K.A. Ahamburger]

Not sure, but there is a couple of questions in this thread that are being evaded that is for sure.. 

[Deleted]

The Baby Boomer generation is getting old and their ideas about how political systems and economies operate are getting even older. My generation is coming into its own and we will determine our own destinies. You can step aside gracefully or you can be pushed aside. Either way your days of running the lives of this planet are numbered. The Fourth Turning is here.

I disagree. I think all the rich old geezer Baby Boomers will die & leave their money to young "lollypops" that are much younger than your generation. In other words your generation will be screwed out of the money.

[jarrett1]

The "X" and "Y" generation (17-35) is larger than the baby boomers and more conservative because they have seen their parental screw ups and the financial criss...not risk adverse, just more cautious

Mean while imigrant babies have past the 50% of population mark for the first time tis month

[sunrnr]

Every generation, since the very first one thinks the previous generation(s) screwed things up and their generation will make things correct again.
What everyone forgets, is each generation is the sum total of ALL the generations that came before. The challenges each new generation faces may be totally different from those previous generations faced.
New challenges, new methods of dealing with them. OR maybe the challenges being faced now aren't really any different, but new methods of dealing with them are needed?