Forum Post: Bank of America Bosses Find Friend in the Fed

This is one of the bigger news stories to come out recently in regards to collusion between The Fed and banking interests at the detriment to taxpayers
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Here's the gist of the story, broken two days ago by Bloomberg News. Bank of America, which got hit with a credit- rating downgrade last month by Moody's Investors Service, has moved an undisclosed amount of derivative financial instruments from its Merrill Lynch unit to its biggest commercial-banking subsidiary. The latter is loaded with insured deposits and has a higher credit rating than Merrill or the parent company.

The Federal Deposit Insurance Corp. is objecting to the transfers. That part is easy to understand: More risk for the retail lender means more risk for FDIC-insured deposits, which ultimately are backstopped by the U.S. government.

The Fed, however, has signaled to the FDIC that it favors the transfers. Shifting the derivatives to the commercial lender may let Bank of America avoid collateral calls and termination fees stemming from the rating downgrade. Some Merrill clients may prefer having their contracts with the higher-rated unit. In short, the Fed's priorities seem to lie with protecting the bank-holding company from losses at Merrill, even if that means greater risks for the FDIC's insurance fund.

http://tiny.cc/vxwr6

NYPost has a very similar article on the subject, if you would like to accuse SFGate of "liberal bias"

http://tiny.cc/92gdo