Forum Post: BREAKING financial news to bailout the banks out once more
Posted 13 years ago on Oct. 19, 2011, 10:58 p.m. EST by Dutchess
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This story from Bloomberg just hit the wires this morning. Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.
This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.
This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.
What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan. Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.
This is a recipe for Armageddon. Bernanke is absolutely insane. No wonder Geithner has been hopping all over Europe begging and cajoling leaders to put together a massive bailout of troubled banks. His worst nightmare is Eurozone bank defaults leading to the collapse of the large U.S. banks who have been happily selling default insurance on European banks since the crisis began.
CLICK ON THE LINK AND SCROLL DOWN FOR THE WHOLE STORY
http://dailybail.com/home/holy-bailout-federal-reserve-now-backstopping-75-trillion-of.html
The Dirt Bagger Party will stop this!
The pure beauty of the system and laws the one % have created, is that they simply can't lose.
No wonder they are all smiling.
The petro-dollar is paper. China will be pretty pissed off holding onto worthless bonds.
Thanks for sharing this ....need to get the word out
That story sounds ominous all right. In some sense, they might have just done this movement a great service by acting to potentially cover their ass at US taxpayer expense. Fuck that. Of course all sounds good to the wall street types that run the fed and the dept of treasury, we can't have the big bank losing it now can we... to big to fail and all that... fuck them.
$79 trillion in derivatives... holy fucking shit?
The BofA mortgage mess is coming home to roost. The bank's asset base is fading fast, and the only way to prop that up is with an slight of hand with derivatives. It's beyond me that the FED would view these as a solid asset to be used for reserves.
If I understand what you are saying, is that they are placing the derivatives in the "bucket" that's covered by insurance from the "bucket" that ain't. That would be for one reason only.....BofA expects some major loses. Am I following this correctly?
Not clear to me if they actually expect losses or not, but their credit rating got hit, and i think they expect their credit rating to improve by the extra ass covering... but of course if the shit does hit the fan... the US tax payer would take some of the hit for their derivative cocktails gone bad... i took no stupid risks... get off my back assholes at BarfOfA.
You have to wonder if the risk-to-return ratio is being calculated by the Fed when a bank does that. I suspect not. The return to the taxpayer never seems to rise with the risk. The Fed uses interests rates for other means (control inflation....etc.) You have to wonder why the Fed doesn't view risk like all other investors. But then again....I am just a "central bank" novice.