The Federal Reserve and BofA Initiate a Coup to Dump Billions of Dollars on US taxpay

Discussion in 'Media' started by hvactec, Oct 19, 2011.

  1. hvactec
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    BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit

    Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

    The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

    Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

    “The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

    Accommodating Clients

    Jerry Dubrowski, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment on the transfers or the firm’s discussions with regulators. The company “continues to accommodate the needs of our clients through each of our multiple trading entities, including Bank of America NA,” he said in an e-mailed statement, referring to the company’s deposit-taking unit.

    Barbara Hagenbaugh, a Fed spokeswoman, said she couldn’t discuss supervision of specific institutions. Greg Hernandez, an FDIC spokesman, declined to comment.

    Bank of America posted a $6.2 billion third-quarter profit today, compared with a loss of $7.3 billion a year earlier, as credit quality improved and the firm booked one-time accounting gains. The lender rose 7.3 percent to $6.47 at 1:54 p.m. in New York trading, making it the day’s best performer in the Dow Jones Industrial Average. Credit-default swaps on Bank of America eased 10 basis points to a mid-price of 380 as of 11:49 a.m. in New York, according to broker Phoenix Partners Group.

    read more BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit - Bloomberg
     
  2. editec
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    editec Mr. Forgot-it-All

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    Great, just great.

    This is why separating commercial banks from saving banks was a good idea in the first place.

    We are SO hosed.
     
  3. hvactec
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    By Repealing Glass-Steagall, Gramm-Leach-Bliley Made "Too Big To Fail" Banks Possible. As reported by the Huffington Post: "On the 10th anniversary of Congress voting to repeal the law that had long separated Main Street commercial banking from Wall Street investment banking, current members of the body are talking about ways to potentially bring it back. A return to the Depression-era law -- known as Glass-Steagall -- is now being seriously discussed. Some leading economists and financial thinkers point to its repeal as a precipitator of the current crisis, because it enabled banks to become 'too big to fail.' [...] On November 5, 1999, when Congress passed the bill repealing Glass-Steagall, it was hailed as something that would provide the country with the "opportunity to dominate" the new century. The bill was the Gramm-Leach-Bliley Act of 1999, and it enabled banks to engage in the kind of activities that had been largely prohibited since the Great Depression." [Huffington Post, 11/5/09]
    10 Years Ago Today, Congress Allowed For "Too Big To Fail"

    Then-Senator Phil Gramm "Inserted A Key Provision Into The 2000 Commodity Futures Modernization Act That Exempted...Derivatives Such As Credit Default Swaps From Regulation." As reported by Time: "As chairman of the Senate Banking Committee from 1995 through 2000, Gramm was Washington's most prominent and outspoken champion of financial deregulation. He played the leading role in writing and pushing through Congress the 1999 repeal of the Depression-era Glass-Steagall Act that separated commercial banks from Wall Street, and he inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives such as credit-default swaps from regulation by the Commodity Futures Trading Commission (CFTC)." [Time, 1/24/09]
    Phil Gramm Says the Banking Crisis Is (Mostly) Not His Fault - TIME

    Financial Instruments Insulated Mortgage Originators And Securities Traders From The Risks Of The Loans They Made And Traded. From a Businessweek op-ed by business consultant Michael Watkins: "Securitization of mortgages into collateralized debt obligations (CDOs) decoupled mortgage originators (brokers and others) from the credit risks of the loans they were writing. At the same time, U.S. investment law shielded sellers of these securities from the legal consequences of fraud by originators. This introduced corrosive conflicts of interest into the system." [Businessweek, 12/17/07]
    Subprime: A Predictable Surprise
     

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