Malady

There is no doubt that over the last few weeks we have seen some shit go down.  Europe is about to be pimped to the highest bidder and here in the US, well we're all pretty much....  So with that I want to point out Bank of America for those who have been too busy either protecting their principal or adding to it in a substantial way.  We have watched this bank go from charging $32.00 for an over-draft fee, from what I can remember personally (I had an account in N. Carolina back in 2006) to putting the entire country's finances on the line.  Dave Gonigam mentioned in his piece from Daily Reckoning that "with the blessing of the Federal Reserve, Bank of America moved the derivatives book off the balance sheet of Merrill Lynch and put them on the books of its own commercial banking unit. The result means yet another increase in liabilities for the U.S. taxpayer".  The derivates are those succulent morsels from the Merrill days prior to late 2008.  This is a liability that now makes the US a going-concern.  Zero Hedge reported earlier they found "that tomorrow the Treasury will announce approximately $99 billion in 2, 5 and 7 Year bonds to be auctioned off October 25 through 27... With a very appropriate settlement date: October 31, elsewhere known as Halloween".  We believe until the people do something themselves, now, to stop this, such as using a credit union or no bank at all (it must be behavioral change, government won't help), this behavior will continue.  This is a case study in moral hazard for the future generations.

EXHIBIT A

So they have not only stopped customers from removing cash (which they can legal do, though that guy wouldn't believe if we told him) they jumped the gun and ordered in the police.  

And how could we forget when the announcement came for the $5.00 per month charge to use an everyday debit card for transactions in an economy with your own money.  Remember when people were moving so fast to remove their cash that BoA shuttheir website down?  Money that you gave to the bank to put into their fractional reserve system, which is then lent out and used to enable fast loans so they can be  pooled into securities which are used to profit off the transfer of risk, risk which is transfered to the US.  If the Fed ever takes a loss, it won't fork over profits to the Treasury, it may even need to take a remittance from the Treasury!

By Dave Gonigam over at Daily Reckoning:

10/19/11 Baltimore, Maryland – One question surrounding the Occupy Wall Street (OWS) protest is “Why now?” In part, the “corruption” is complex and hard to articulate. Here’s one valiant attempt:


“In some ways,” President Obama boldly stated to ABC newsmen yesterday, “they’re not that different from some of the protests that we saw coming from the Tea Party. Both on the left and the right, I think people feel separated from their government. They feel that their institutions aren’t looking out for them.”

Duh.

Wait until they get a load of what Bank of America has just done.

With the blessing of the Federal Reserve, Bank of America moved the derivatives book off the balance sheet of Merrill Lynch and put them on the books of its own commercial banking unit. The result means yet another increase in liabilities for the U.S. taxpayer.

Again, let’s follow the bread crumbs:

This morning’s derivatives transfer announcement was initiated by a Moody’s downgrade of Merrill Lynch on Sept. 21. Merrill customers got jittery, perhaps rightly so.

Merrill Lynch can’t borrow from the Fed’s discount window. Nor is it backed by FDIC deposit insurance. But Bank of America’s commercial banking unit has both of those benefits.

Following a sketchy late-night deal on Sept. 14, 2007, covered in Andrew Sorkin’s book Too Big to Fail (now an HBO film), Bank of America owns Merrill outright.

Now with the transfer, derivative bets placed by formerly reckless Merrill traders are available for taxpayer bailout money… without all the nuisance of political debate in Congress.

Easy, peasy. Government bailouts by design. Love it.

How much money are taxpayers on the hook for? Well, we don’t know. What little we do know is courtesy of anonymous sources who leaked the news to Bloomberg.

Here are some figures:

• Derivatives held by Bank of America’s commercial banking arm before this shift: $53.2 trillion
• Total derivatives held by all units of Bank of America: $74.8 trillion
• Total deposits in Bank of America’s commercial banking arm backed by FDIC insurance: $1.04 trillion
• Amount of FDIC’s deposit insurance fund: $3.9 billion.

One assumes a sizeable portion of the derivatives are credit default swaps on eurozone government debt.

Recall that most of the big European banks are larded down with the sovereign debt of the nigh-insolvent PIIGS countries.

Recall, too, that to guard against the possibility of default, those European banks took out credit default swaps as a sort of insurance policy.

And recall thricely that U.S. banks happily wrote those policies, figuring the possibility of default was so remote it was like free money.