Bank of America Is Too Much of a Behemoth to Fail

[Billybob]

[Oct. 24 (Bloomberg) -- The Obama administration says the Dodd-Frank financial reform law ends “too big to fail,” meaning that no financial institution will ever again need to be bailed out. The promise is alluring, but it’s already proving to be false.

Consider the law’s promise in the context of Bank of America Corp. Through the back door, U.S. regulators are facilitating another round of implicit bailouts, putting more taxpayer money on the line in the form of guarantees. Bloomberg News reported on Oct. 18 that regulators have allowed Bank of America to move highly risky derivatives contracts -- and the associated downside risk -- from Merrill Lynch into the insured retail deposit-taking part of the bank.

The move puts the Federal Deposit Insurance Corp. on the hook for any losses. The FDIC’s deposit-insurance funds come from its member banks, but because the agency can tap a U.S. Treasury line of credit if the fund runs dry, taxpayers could be at risk, too.]


http://www.businessweek.com/news/20...much-of-a-behemoth-to-fail-simon-johnson.html

 

[Dale00]

One more item to add to a long list of things in Washington that stink.

 

[ripnbst]

I hope it does fail and the gov does falter. All this talk of survival and our government in ruin is getting old. Just let it happen already. We're all ready for it anyway. See you all in high places when it happens.

 

[deja]

Didn't they move all their ****** EU bonds over to FDIC insurance, too, so the taxpayers would be footing the bill for BOA's and Morgan Stanley's crappy investment decisions if the EU falters, too?

 

[Glocktogo]

The debil rarely fails.

 

[Billybob]

Didn't they move all their ****** EU bonds over to FDIC insurance, too, so the taxpayers would be footing the bill for BOA's and Morgan Stanley's crappy investment decisions if the EU falters, too?

Not sure about EU bonds but I've read somewhere that some bonds were repackaged as "derivatives"

 

[Billybob]

The debil rarely fails.

Hires the "right" people.

 

[VitruvianDoc]

To be exact, they are moving 75 trillion in toxic assets into that FDIC account.

Where are all the de-regulators now? Really wish the glass-steagal act and a few more regulations were in place so we could get all this crap off of my generations shoulders that you baby boomers have accumulated...

 

[RickN]

Part of the problem is that the government forced BOA to complete the deal for a bank that turned out to be failing. (wells fargo I think) BOA had made an offer on what they thought was a semi-healthy bank but when the details came out that it was in the crapper BOA tried to back out. (like any smart business would) The government pressured them into completing the deal.

As for deregulation, there are actually tons more regulations now. They are just not the right ones and those that are good are not enforced.

 

[Billybob]

Question; How does the Federal Reserve, (not part of the Gov,) "out rank" the FDIC which is part of the Gov.?


Bank of America Bosses Find Friend in the Fed

[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://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/20/bloomberg_articlesLTBZHS1A1I4J.DTL