Break Up Bank of America Before it Breaks Us

Mary Bottari on December 21, 2011 
 

On Monday, Bank of America (BofA) stocks briefly traded for under $5. Yes, you could buy a share of BofA for less than the noxious debit card fee they tried to force down your throat.

BofA is massive, with assets equivalent to 15 percent of U.S. GDP. So why is it trading for the price of a latte?

Because Wall Street’s dirty little secret is that BofA is a zombie bank. Now the reek is getting too strong to ignore.

The Most Dangerous Bank In America?

In 2008-2009, BofA publicly took $45 billion in TARP bailout funds and secretly took another $91 billion in emergency Federal Reserve loans. According to Bloomberg News, it made $1.5 billion in profits off of those loans. Yet, several analysts predict that BofA is woefully short of capital reserves.

A recent study by NYU’s Stern School of Business ranks BofA as the most systemically risky firm in the United States. These analysts use public information and focus on the capital shortfall that would be experienced by the bank in the event of another crisis. BofA’s weak condition means it is in a position to “create or extend” such a crisis.

As if this were not enough, recent news reports indicate that BofA is trying to move $22 trillion in derivatives out of its Merrill Lynch subsidiary into its FDIC-insured bank. The Fed favors the move (naturally). The FDIC, which provides insurance to depositors if a bank fails, does not.

In this pile of derivatives could be all sorts of problems, including bad European debt, the same kind of debt that brought down Jon Corzine’s derivatives firm, MF Global. Taxpayers don’t backstop MF Global. We do backstop BofA through the FDIC and the Fed.

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Finally, a Judge Stands up to Wall Street

 Matt Taibbi Rolling Stone  

Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.

The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.

This case was similar, but worse. Here, Citi similarly told investors a package of mortgages had been chosen independently, when in fact Citi itself had chosen the stuff and was betting against the whole pile.

This whole transaction actually combined a number of Goldman-style misdeeds, since the bank both lied to investors and also bet against its own product and its own customers. In the deal, Citi made a $160 million profit, while its customers lost $700 million.

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Monty Python - Spanish Inquisition Torture Scene

One for #OWS → Here is how Obama fits into the problem #tcot

Matt Taibbi of Rolling Stone explains how Obama brought in a whole bunch of people from Wall Street, the very day he got elected.

Obama's Harvard classmate Michael Fromen is put in charge of running the Economic Transition Team, basically of hiring people for the team. He also brought in Jamie Ruben, son of Citigroup's Bob Ruben (head of Goldman Sachs - 1990-1992, head of Clinton's National Economic Council, who, as Treasury Secretary, made the Citigroup merger possible, then off to Citigroup.

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And, here's a list of Goldman Sachs personnel in the Obama White House, including Elena Kagan.

AIG Redux: Wall Street Presses Regulators To Repeal New Derivatives Rules

http://www.banksterusa.org on October 28, 2010 - 13:26



It's been pretty well-documented that the ultimate fate of Wall Street reform will depend on a series of highly technical proceedings at federal regulatory agencies. If regulators adopt tough new rules, the financial overhaul could succeed well beyond the expectations of optimistic reformers. But there is a very real danger that banks will be able to roll regulators during these quiet and technical affairs, without any real public oversight. One of the most important areas to watch are the rules surrounding derivatives—the shadowy market that brought down AIG. The battle is already under way, and the bank lobby isn't pulling its punches.

Wall Street reform basically did two things unquestionably well. It created a new Consumer Financial Protection Bureau to curb bank abuses, and it reined in the derivatives market, which is currently a hotbed for fraud, abuse and systemic risk. There are dozens of smaller-bore accomplishments in the Dodd-Frank bill, but derivatives and the CFPB are the two major wins.

Take a look at this 7-page letter from The American Bankers Association—the bank lobby—and this 10-page letter from the International Swaps and Derivatives Association (ISDA)—another Wall Street lobby group. See if you can spot where they regulators to completely erase the legislative progress on derivatives.

You probably can't-- unless you're a bank lobbyist, a finance lawyer or a nerdy blogger. And the bank lobby loves it that way, because there are only a few nerdy bloggers out there, even fewer financially literate mainstream reporters, and hundreds and hundreds of bank lobbyists. Here are the critical passages from page 6 of the ISDA letter, and page 4 of the ABA letter.

Find Out Here