An excellent article on B of A's woes

[TrogL]

This is from last October, but we're still seeing the ramifications today.

http://www.neweconomicperspectives.org/2011/10/not-with-bang-but-whimper-bank-of.html

The blog site is a hangout for post-Keynesian economists.

BAC’s request to transfer the problem derivatives to B of A was a no brainer – unfortunately, it was apparently addressed to officials at the Fed who meet that description. Any competent regulator would have said: “No, Hell NO!” Indeed, any competent regulator would have developed two related, acute concerns immediately upon receiving the request. First, the holding company’s controlling managers are a severe problem because they are seeking to exploit the insured institution. Second, the senior managers of B of A acceded to the transfer, apparently without protest, even though the transfer poses a severe threat to B of A’s survival. Their failure to act to prevent the transfer contravenes both their fiduciary duties of loyalty and care and should lead to their resignations.

[dixiegrrrrl]

1. Ha! The article comfirms what I thought about the derivative transfer.

"BAC continues to deteriorate and the credit rating agencies have been downgrading it because of its bad assets, particularly its derivatives. BAC’s answer is to “transfer” the bad derivatives to the insured bank – transforming (ala Ireland) a private debt into a public debt".

[Ruby the Liberal]

2. That was the whole stench about the Merrill derivatives

that dropped my jaw last year. Yeah, they had to take them on balance sheet, but as long as they are now insured by the taxpayers, who gives a shit, right?