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BofA is moving $53 trillion off of Merrill’s derivative book to its own core books and into an account, which the FDIC insures. Which means that with a stroke on a keyboard the American Taxpayer is now responsible for, and will pay for, bank/brokerage losses on these ‘investment’ gambles.
Of course, Bank of America and Merrill Lynch are insolvent. Bankrupt. Kaput. If not for fake FASB ‘mark to model’ accounting and being designated TBTF they would be out of business. My guess is this move is the first step in their ultimate demise.
Conveniently, these derivative’s are now insured and will be paid by the FDIC aka The American People upon BofA’s failure.
Who holds these derivatives? Most are held by the same financial institutions that we have been bailing out. The Federal Reserve Bank has ‘approved’ this transfer of risk from investors to the American Public. The FDIC in not happy, but is helpless and cannot overrule the private Federal Reserve Bank.
In other words, the 1% have now transferred the risk of a $53,000,000,000,000 default onto the backs of the American People.
Congress has been silent on this travesty.
If you would like to contact your Congressman, you can conveniently send a email from congress.org .
If you would like more details about this outrageous act, zero hedge is a good place to start.
13 Comments
Thanks – just when you think it can’t get any worse…you find another broom handle sticking out of your backsides.
You need to read more closely. The FDIC is only on the hook for insured deposits, not the huge number you highlight. From the Bloomberg article linked at zero hedge:
Incorrect. The bankruptcy reform act of 2005 put holders of derivatives in first position for all assets of a financial institution that goes BK. Therefore, if BofA goes under, there will be institutional assets to pay off the depositors, and in fact, any money that the FDIC puts into the instution would have to go to the derivative holders first. IOW, after the derivative holders took all the remaining assets, the FDIC would have to pay off the rest of the outstanding derivatives debt BEFORE it could use any money to pay off depositors.
I’m afraid you are misinformed. The FDIC only insures deposits, and the bankruptcy laws are irrelevant to this issue.
Nope. That is only if the FDIC should take over the bank. Not if the bank files for bankruptcy first.
If the FDIC only insures deposits, how can it be on the hook for more than the total insured deposits? This is a matter of what FDIC covers, not the other assets of the bank.
Ah but those deposits and more will be part of the settlement going to the holders of derivatives and the investors.
That doesn’t answer the question. Even if the insured deposits are completely depleted in bankruptcy, the FDIC is only on the hook to the insured depositors, not to the bank’s other creditors.
Maybe it will be clearer if you understand that FDIC insurance would be post-bankruptcy, i.e., not an asset in the bankruptcy proceedings, and available only to insured depositors.
The FDIC insures deposits that YOU make. If a bank fails, the government insures that YOU get your money back, not the banks other debtors. And the FDIC insures UP TO 300k per deposit account. Stocks, bonds, mutual funds, and money funds are not covered.
This morning I wake up to another scary-bizarre video from Brasscheck about something I have been reading about all week… That in Louisiana they are going to a cashless system,where all your funds go through a bank card. It seems to be illegal to use cash even for second hand articles.
Of course the banks take their percentage or charge for kindly providing transactions for you.
Also, what happens when you are living or traveling outside the U.S. and in countries that dont do credit cards ? My mind is boggling.
On top of that and along the same lines…. In Tennessee, the Homeland Security has set up checkpoints on all highways and are stopping trucks (but cars cant be far off) at random and searching them. Then telling the drivers that if they see “anything suspicious” along the streets to report it. They are saying this is also a test case state. Setting up for nation wide.
Welcome to the Fascist States of America.
As for the above article, specifically… If corporations are people, it must be possible for other individual “people” to sue them for physical and mental anguish and outright thievery? Everyone in the U.S. who has been stolen from by a corporation/person could individually sue , clogging the courts till the end of time?
Would someone please provide a definitive reference that settles the question of whether the FDIC is one the hook for these derivatives or not? I don’t understand why they should be, but I’ve seen the claim here and elsewhere that the are, or will be if BofA is allowed to make this transaction, which the Fed supports and the FDIC opposes.
The following is from the main Bloomberg article on this proposed transaction: http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html