Bank of America - Still too big to fail?

[TBF]

This is an excellent article I found that explains the derivatives crisis for non-financial types (like myself). Bank of America is again forcing regulators to bail them out with tax payer money as they did in 2008:

FDIC To Cover Losses On $75 Trillion Bank of America Derivative Bets

Posted on October 20, 2011 in Bank Failure, Banking News, Biggest Banking Failures, Dodd-Frank Act, Failed Banks, FDIC, featured, Mega Banks, problem banks, Too Big To Fail Banks

Potential losses on Bank of America’s massive $75 trillion book of risky derivative contracts has just been dumped onto the FDIC by the Federal Reserve.

Derivatives, once described by Warren Buffet as “financial weapons of mass destruction” are complex contracts entered into for speculation or to hedge risks linked to a wide variety of other (derivative) financial instruments such as currencies, commodities, interest rates, bonds, etc. In testimony to the Financial Crisis Inquiry Commission in March 2011, Buffett warned that the trillions in derivatives held by major banking institutions could be “disruptive to the whole financial system” and that the risks were “virtually unmanageable.”

Regulators have fought to rein in risky trading in derivatives by banks under the Volcker Rule, but the banks have fiercely resisted and, so far, have been winning the battle. Derivatives contributed to the financial meltdown in 2008 when the government was forced to bail out giant insurance company AIG whose huge derivative bets exploded, putting the entire financial system at risk. Part of the problem is that due to the immense complexity of derivatives, regulators are unable to formulate rules that would effectively regulate them or reduce risks.

Each derivative contract entered into by a bank has counter parties taking the opposite sides of the risk trade...

... To prevent complete panic by the public from a looming failure of Bank of America, the Fed, FDIC and US Treasury would again have to provide virtually unlimited financial support, courtesy of the U.S. taxpayer.

Read the entire article here: http://problembanklist.com/fdic-to-cover-losses-on-trillion-bank-of-america-derivative-bets-0419/

[jorno67]

1. too failed to be big!

[piratefish08]

2. i've seen countless posters here claim that all the TARP money was paid back....

and shit, we MADE money on the deal..........


soooooo, logic would dictate that the US should invest AT LEAST $75 trillion more of our money with BOA.


how could we lose?

[TBA]

3. Question for those more savvy

How in the hell can the FDIC cover 75 trillion in losses? Can that be done?

What about the folks who have their money in BofA. I do not but my mid-size company employer does.

[TBF]

4. Buffet says "virtually unmanageable". I tend to trust his assessment,

but would be willing to hear other arguments. The thing that really boggles the mind is that this is happening again. I understand, in theory, POTUS coming on board and having to go through with Bush commitments (and that MF made a mess of everything). But for it to happen again 3 years later ... why?

[Chih]

7. If the $5 billion Mr. Buffet recently invested in BoA is any indication,

it would appear that he has redefined the nature of his assessment.

http://money.cnn.com/2011/08/25/news/companies/warren_buffett_bank_of_america/index.htm

[TBF]

9. Or perhaps decided he may as well make some money off this since

the FDIC is going to bail it out again anyway?

[Lucky Luciano]

5. It's $75T notional. Quite different $75T dollars. though the backstop

Would probably be a few hundred billion actual dollars.

[piratefish08]

6. is there even $75 trillion 'real' dollars in the world?

i'm pretty certain there isn't.

but we'll find it. if a bank needs it.

[dd2003]

15. they cant

thats the point.... people get screwed....tptb live on

[Frustratedlady]

8. If people start pulling their money out, that question will be answered quickly.

I wouldn't trust anything they had to say. They are based on lies.

[TBF]

10. Agree, for folks who have other banks or local credit unions it might be time to consider

switching. I know it's a hassle but I got out of there a couple of years ago and very glad about that.

[Thav]

11. I'm in the process of closing my account with them.

I've got most of my bills switched over, I just have a few others to do. Then I will close my account of close to 19 years with them.

[spooked911]

12. still just fucking insane

there should be a massive outcry about this

[banned from Kos]

13. no outcry because its not true - the FDIC will not cover $75 trillion in derivatives

its blog nonsense.

[spooked911]

14. First, this isn't just on blogs-- the story is in major sources

Second, it's not so much that the FDIC will not cover that much but they CAN'T-- it's clearly too much money.

Third-- BOA is still trying to get FDIC to be on the hook for a HUGE amount of basically gambling debts (at least a trillion). It's disgusting and fucking insanity.