Bank of America to Cover Losses With Your Tax Dollars

Bank of America isn’t doing so hot. In a desperate move by BoA’s management, derivatives will be dumped onto a subsidiary paid for by taxpayers, of course.

Even after the $45 billion Bank of America received in bailout funds, that bank is struggling big-time – three years after the peak of the financial crisis.

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

According to Bloomberg:

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…

Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

Meanwhile, Bank of America claims that they had been preparing for the past nine months for the potential of a downgrade and feels “good” about how they were able to minimize the “potential impact.”

Bank of America’s Chief Financial Office Bruce Thompson reported that the downgrade has not caused in changes in their global excess liquidity sources.

Well, good for them…The bad news, is that these kinds of comments are often viewed as arrogant and leave people feeling like Bank of America is a permanently insolvent and criminal bank that will constantly rely on the government and American taxpayers to bail them of financial messes.

Denying your customers the right to stop doing service with you by refusing to let them close their bank accounts leaves a bad taste in the mouths of everyone; especially loyal bankers.

Karl Denninger explains it like this:

Bank customer initiates a swap position with Bank.  In doing so they intentionally accept the credit risk of the institution they trade with.

Later they get antsy about perhaps not getting paid.  Bank then shifts that risk to a place where people who deposited their money and had no part of this transaction wind up backstopping it.

This effectively makes the depositor the “guarantor” of the swap ex-post-facto.

That the regulators are allowing this is an outrage.

To try to lure new clients in and convince old clients to stay, BofA has even televised commercials offering teaser promotions with “cheap cash rewards” with plans to spike rates up by nearly 23 percent after the promotional period…

Not to mention the $5 monthly fee they plan to charge customers just for using their debit-cards.

More taxes and all these sneaky fees after $45 billion in bailout money? Sounds like serious trouble to me…

 

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One Response to Bank of America to Cover Losses With Your Tax Dollars

  1. After reading this blog post I was immediatly reminded of “When defeat comes, accept it as a signal that your plans are not sound, rebuild those plans, and set sail once more toward your coveted goal.” — Napoleon Hill

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