Democratic Underground Latest Greatest Lobby Journals Search Options Help Login
Google

How BOA can use the 2005 Bankruptcy Law to steal depositors money.

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
Home » Discuss » Topic Forums » Economy Donate to DU
 
dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 01:25 PM
Original message
How BOA can use the 2005 Bankruptcy Law to steal depositors money.
Remember that BOA moved about 80 trillion $$$ of derivatives into its own bank?
And it seemed strange?

Over at Market Ticker, there is a possible understanding of why.
And why we need to understand what clawback means, and how it can hurt even bank depositors.

Summary:
"Recently Bank of America transferred a bunch of derivatives into their banking arm.
"A bunch" means somewhere around $80 trillion worth.

Now pay very careful attention, because part of the bankruptcy "reform" law in 2005
placed derivative claims in front of depositors in a business failure - including a bank failure.

What JP Morgan is claiming in the MF Global case is that the derivative trade (which is exactly what a "Repo to Maturity" trade is - it's a derivative)
is entitled to preference in the case of MF Global over those who had cash there for safekeeping
either as a margin deposit or just as free cash as you would hold free cash in a bank.

If a major bank blows up this very same claim,
supported in existing Bankruptcy Law with the changes signed by George Bush in 2005,
will be used to steal the entirety of your bank account,
and if you detect the impending blowup shortly before it happens -- say, 90 days before -- you're still exposed to the risk through clawback!"

Link to whole article:
http://market-ticker.org/akcs-www?post=198650

Notice that last sentence.
even if you have closed your account BEFORE a bank goes bankrupt, you STILL can be liable for clawback.
Repeat: derivatives legally get paid off before depositors.
BOA moved all its derivatives to its own banks.
BOA's bank stock is down to 1/3 of what it was a year ago, has had more losses than any of the other big banks.
It will make tons more money by going bankrupt and stealing depositor's money to cover the derivatives than it will by continued operation.

You do the math.

Refresh | +6 Recommendations Printer Friendly | Permalink | Reply | Top
barbtries Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 01:26 PM
Response to Original message
1. what is clawback?
if my money is gone from that bank they'll have to chase me to hell to get it back. i'm going to go look it up but never heard the word before today.
Printer Friendly | Permalink | Reply | Top
 
dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 01:38 PM
Response to Reply #1
3. clawback is a term being used a lot of late.
Here is an example of how the term is being used in the case of the post:

Frederick Grede, trustee for the bankruptcy of futures commission merchant (FCM) Sentinel,
has sued 50 of its former customers to recoup some $600 million in funds that were withdrawn prior to its bankruptcy.

He has already settled out of court with some customers and recovered about $25 million. The rest remains in litigation, filed before the two-year statute of limitations ran out.

His view is that the loss of funds should be shared equally, on a pro-rata basis, among all customers, not only those who were left holding the bag when Sentinel filed for bankruptcy.

http://www.reuters.com/article/2011/11/10/us-mfglobal-clawback-idUSTRE7A91DE20111110

There is also a slightly different use of the term relating to banker bonuses, Wiki explains it:

In finance economics, a clawback is when an organization (typically a financial firm) that is attempting to recover from a catastrophic shift and/or collapse (e.g., the current worldwide financial crisis) attempts to essentially "tame" its past practices by giving its most highly-paid employees bonuses in pay that are deferred rather than bonuses that are able to be spent by an individual immediately.
http://en.wikipedia.org/wiki/Clawbacks_in_economic_development
Printer Friendly | Permalink | Reply | Top
 
barbtries Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 02:16 PM
Response to Reply #3
4. i looked at the wiki page.
for someone like me who never has much in the bank there would be no upside to pursuing me in such a maneuver.
i'd like to see the people claw back some or all of the wealth they created, which has been siphoned into the pockets of the very very rich by various nefarious ways.
Printer Friendly | Permalink | Reply | Top
 
Po_d Mainiac Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 02:59 PM
Response to Reply #3
5. clawback example
Those that received dividends from the Madoff ponzi get to keep no more than the original investment. Anything above and beyond that initial investment is fair game for the trustees to 'clawback' and disburse to investors that got cornholed.
Printer Friendly | Permalink | Reply | Top
 
Uben Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 01:28 PM
Response to Original message
2. They can't steal it if they don't have it!
I will never keep money in a big bank or subsidy thereof. That's like hiring a cat to watch your bird.
Printer Friendly | Permalink | Reply | Top
 
dtexdem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 03:35 PM
Response to Original message
6. Well, stealing it from the FDIC.
Except for those with accounts in excess of FDIC limits.

Still theft from the public.
Printer Friendly | Permalink | Reply | Top
 
Citizen Worker Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 03:42 PM
Response to Original message
7. If I recall there were 19 good democrats who voted for the so called bankruptcy reform.
Edited on Thu Dec-08-11 03:59 PM by Citizen Worker
http://www.govtrack.us/congress/vote.xpd?vote=s2005-44

Edit: change number of democratic senators voting Yea, striking Hillary Clinton, add link.
Printer Friendly | Permalink | Reply | Top
 
DU AdBot (1000+ posts) Click to send private message to this author Click to view 
this author's profile Click to add 
this author to your buddy list Click to add 
this author to your Ignore list Mon Oct 25th 2021, 06:46 PM
Response to Original message
Advertisements [?]
 Top

Home » Discuss » Topic Forums » Economy Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002 DCScripts.com
Software has been extensively modified by the DU administrators


Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC