Sleight of hand: BofA moves dodgy Merrill derivatives to bank

[Donnachaidh]

http://www.nypost.com/p/news/business/sleight_of_hand_uy96iNSbW99JHMRnbxgvfL

A plan by beleaguered Bank of America to foist trillions of dollars of funky Merrill Lynch derivatives onto its depositors is raising eyebrows on Wall Street.

The rarely used move will likely save the bank millions of dollars in collateral but could put depositors’ cash behind the eight ball.

The move also brought to light fissures between the nation’s top banking regulators, the Federal Deposit Insurance Corp. and the Federal Reserve, in the wake of new regulations meant to curb the free-wheeling habits that fostered the worst crisis in a generation back in 2008.

At issue is BofA’s decision to shift what sources say is some $55 trillion in derivatives at Merrill Lynch to the retail bank unit, which houses trillions in deposits insured by the FDIC.

Read more: http://www.nypost.com/p/news/business/sleight_of_hand_uy96iNSbW99JHMRnbxgvfL#ixzz1bWzXtLtf

[dkf]

1. This story is starting to get around.

Good.

[femrap]

2. So the intent is

to bankrupt the FDIC. Let BofA Fail.

And people wonder why the Glass-Steagall Act was enacted.

[salin]

3. Because of the conversations started with the ows movement - more folks are

paying attention to this story - and I am seeing Glass Steagall referred to more frequently than ever.

[pa28]

4. Interesting timing.

This move comes just a week after President Obama appeared to take banker prosecutions off the table.

[madville]

5. The Treasury and the Federal Reserve made BOA follow through on the merger

BOA wanted to back out of the merger with Merrill Lynch after they saw the books and how screwed it was but Bernake and Paulson "persuaded" BOA to follow through with the deal. This was in 2008 when Lehman Brothers had just failed because no one would touch it and if Merrill had done the same the markets would have melted down. They are still going to meltdown, kick the can down the road, here it is resurfacing three years later. The federal government should back the worthless paper they made BOA take on at the time.


Some reading:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a5A4F5W_PygQ

http://en.wikipedia.org/wiki/Merrill_Lynch#Sale_to_Bank_of_America

[madville]

6. Makes the 14 trillion dollar US debt seem insignificant

There is hundreds of trillions in bad paper out there, Bank of America has 79 TRILLION of it themselves, if Europe implodes we go with it.