6 votes

BoA Dumps $75 Trillion In Derivatives On Taxpayers, Super Committee Looks Away. Seize BoA Now.

Re-posted with permission.

http://www.opednews.com/articles/BoA-Dumps-75-Trillion-In-by...

It's real money, especially since "Bank of America Deathwatch" financial pundits have multiplied on the web and it has become a bit of a geek guessing game.  When will BoA finally tank?  And when it tanks, the question becomes, who will walk away with all their money, and who will be left holding the bag?  The deal just snuck through with the Federal Reserve's, and implicitly, Congress's approval insures Wall Street casino gambler's debts by moving them into accounts meant for penny-pinching grandmas.  

Citing Bloomberg, financial commentator Avery Goodman tells us:

Even if we net out the notional value of the derivatives involved, down to the net potential obligation, the amount is so large that the United States could not hope to pay it off without a major dollar devaluation, if a major contingency actually occurred and a large part of the derivatives were triggered.

A bailout for one company's most irresponsible investors triggering a major dollar devaluation?  This is the kind of thing that starts revolutions.  

Goodman reports:

Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

Without going too far into bewildering financial jargon, it's like this: Your wildest son is asking you to co-sign for a debt.  If he can't make his payments, you are on the hook.  How much is the debt?  He doesn't know.  Just sign on the dotted line.

Meanwhile the "super committee" is looking for a trillion or so dollars in hits to everything, including Social Security and Medicare/Medicaid, to keep the budget from going any more out of whack.  It's urgent, they say, for us to stop spending like drunken sailors.  But at the same time they just whipped out a pen and signed for junior, crossing their fingers that something won't happen which is almost inevitable.

Where did I stumble across this news item?  Sure as heck not on MSM, which is focused on the smoke grenade of BoAs recent $400 million fee case settlement.  $400 million fits into $72 trillion almost 2 million times.  Now which is the bigger story?

I stumbled across it posted by an outraged Occupy Wall Street-type on one of their Facebooks.  You don't need to read Karl Marx to become an Occupy Wall Streeter.  The American financial pages will do it.

It is unlikely the taxpayer's hit will be as much as $72 trillion.  Again, no one knows.  But it will be a chunk of money.

BusinessWeek writers Phil Mattingly and Bob Ivry point out that Dodd-Frank is not strong enough to prevent the BoA move:

Separating complex transactions from FDIC-insured savings has been a cornerstone of U.S. regulation for decades, including Dodd-Frank, the regulatory overhaul enacted last year. Bank of America’s transfer prompted some lawmakers to push for stronger rules than were included in that sweeping law.  Senator Bernie Sanders, a Vermont Independent who supported legislation to separate trading operations from commercial banking, said the transaction is a “perfect example why we should break up too-big-to-fail financial behemoths.”

Representative Maurice Hinchey, a New York Democrat who pushed to require splitting commercial and investment banking, said “What Bank of America is doing is perfectly legal -- and that’s the problem.”

Hinchey is among more than 40 House lawmakers who have signed on to a bill that would reinstate the Glass-Steagall Act, the Depression-era law that enforced separation of depository institutions from investment operations.  Most are Democrats, but that leaves roughly 180 House Democrats and almost all the Republicans who have not signed onto the bill, and at the moment have no intention to.  Not to mention the "super committee" eyeing your Social Security.  Nor Obama.

A commenter in a Columbia Journalism Review piece on the Bloomberg reportage says:

The government should not be on the hook for the bets of an investment bank which is impossible when you allow a deposit and investment bank to merge.

The re-instatement of Glass_Steagall, which prevents bankers from going to Vegas with grandma's money, is consistently on lists of reforms being being debated by OWS. (Also please see "Demand to Get the Money Out of Politics: A "One Demand" for Occupy Wall Street?," Truthout)

Glass-Steagall began to be dismantled under Ronald Reagan, with Bill Clinton finishing the job for Wall Street in 1999.  When Bill Clinton signed the law, Progressive Historian notes:

it symbolized the ending of the twentieth century Democratic Party that had created the New Deal. Although the 1999 law did not repeal all of the banking Act of 1933, retaining the FDIC, it did once again allow banks to enter the securities business...

The repeal of one of the most important pieces of legislation in this nation's history came about as a result of another Clinton "triangulation,"...

The transaction is against the Federal Reserve's own regulations, but as Avery Goodman points out, Congress has given ultimate power to the Federal Reserve to ignore its own enabling Act legislation.  The pertinent passage of the enabling legislation reads:

The Board may, at its discretion, by regulation or order exempt transactions or relationships from the requirements of this section if it finds such exemptions to be in the public interest

Dave Johnson writing for Truthout.org summarizes the absurdity well:

This situation of crony government protecting the connected rich while people are in the streets demanding change is more and more reminiscent of Egypt under Mubarak.... Currently in Washington Congress' elite "super committee" represents the 1%, looking at ways to take more money out of the economy, discussing cutting Social Security at a time when many people have lost their pensions and savings. They are discussing cutting Medicare and other health services at a time when more and more people are in need. They are discussing cuts and cuts and cuts, when working people are falling behind and behind and behind.

But the actual causes of the deficits that have Congress so concerned are ignored. Reagan and the Bushes cut taxes on the rich and increased military spending, and the deficits and resulting debt soared. It is right there in front of our faces. But even with such "concern" about deficits the tax cuts for the rich continue and the huge increases in military spending are left alone. Instead Congress discusses austerity - making the 99% pay for the benefits and bailouts for the 1%.

Now why are those protesters out there again?   Simple.  The ones whose interviews the MSM does not air read the financial pages.   At the same time many politicians, including Obama, give plenty of lip service about busting up banks which are "too big to fail."  But unless someone does something soon, BoA is a done deal.  As always, never listen to what politicians say.  Watch what they do.  A couple of currency devaluations, and we're in Greece.

It is something when financial geeks in conservative business pages are calling for the government to seize Bank of America now, before it brings just America down with it.  That's when you know we are all in this together.

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Congress contact page (including the "super committee")

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Absence of Law

This is what happens. It is everyone for themselves. The government will pursue raw milk producers to the full extent along speeding tickets. But heavens, can't touch the people and only aid the people who are absolutely destroying the financially viability of the country.

On a side note , Berlusconi is resigning, everything will be ok and wonderful again by next week and all the debts will have disappeared ... lmao

donvino

I don't think "seizing" is going to help.

However,a simple ruling and a letter to BOA that because of the precarious nature of their practices, none of their assets are insured by gov't any longer, and they will be on the hook for ALL losses, and a criminal investigation is forthcoming.
That oughtta do it.

Legally Congress can force the Fed to revoke its

approval of the move, so that letter, I think, would come from the Fed. FDIC is up in arms but I think it is bound by law to insure anything deemed "demand deposits" for up to $250,000, which BoA will spread into as many different accounts as possible and probably use more razzle dazzle to do it.

Other thoughts?

A man who views the world the same at fifty as he did at twenty has wasted thirty years of his life.
-- Muhammad Ali

Sanford Weill, former Citigroup Chairman and CEO sells NY haunt.

What is Stanford Weill doing now? He was in charge of Citigoup when it benefited from the evisceration of Glass-Steagall Act & merged CittBank with Travelers Insurance. He just put his NY NY penthouse up for sale. Flight risk?
********************************************************

Former Citi head lists 15 CPW home for $88M
The Real Deal Online November 10, 2011

Former Citigroup Chairman and CEO Sanford Weill and 15 CPW Former Citigroup Chairman and CEO Sanford Weill is putting his 15 Central Park West penthouse on the market for $88 million, more than twice what he paid for it in 2007, the Wall Street Journal reported. Weill and his wife plan to donate the proceeds to charity and downsize to a sixth-floor apartment they own in the building.

The Weills paid $43.7 million for the 6,744-square-foot apartment in 2007, or more than $6,400 per square foot, then a record for price paid per square foot. The current price per square foot record holder is another penthouse in the building, which William Zeckendorf sold for $40 million, or $9,940 per square foot, in December 2010, according to the Journal. If the apartment sells near its asking price, the Journal said it would set a Manhattan price record. The apartment, which also has a 2,077-square-foot terrace, is in the smaller of the two structures that comprise 15 CPW and is being marketed by Kyle Blackmon of Brown Harris Stevens. ...
http://therealdeal.com/newyork/articles/43614

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Derivatives aren't money! They're bets.

These banks are attempting a huge scam. They're pretending that their derivatives are money they can deposit in government-insured accounts. IT'S A TOTAL CROCK!

Your correct about them being bets, but

the reason for the deposits, is to put the taxpayers on thr hookfor their losses. The biggest dillema is, that there is no way to determine how much money is owed, because they are 'back door' instruments, that are undisclosed. Our wonderful Fascist government allowed the Dodd/Frank bill to pass, which only gave these crooks more secrecy. Here's 12 facts proving we have 'foxes guarding the hen house's', and this is what's 'on the books'.
http://theeconomiccollapseblog.com/archives/12-facts-about-m...

Gamblers perpetrated wild, pernicious "art of deception. "

Hawker: Bets! 1 gets you 10! Step right up! Everyone's a winner!

Innocent observer: Even salvage companies could not make heads nor tales.... [Sigh]

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

good post but

Good post but if anyone thinks that Reagan and Bush's cutting taxes is what gave us our deficit, then they need their head examined. The debt is a result of our crazy spending- pure and simple. Reagan's tax cuts, like Kenndey's, actually brought in more revenue. Problem was that it was spent and then some.

Also, Glass-Steagal would not have prevented our current crisis.

The reality is that both investment banks and commercial banks are in trouble because they held large portfolios of mortgage backed securities, not because they were tied to one another. Glass-Steagal didn't prohibit commercial banks from investing in securities. And the investment banks are in trouble because they also hold large portfolios of mortgage-backed securities funded by very short term commercial paper. Glass-Steagal didn't prohibit investment banks from issuing commercial paper or investing in securities. If Glass-Steagal had still been in place, the same thing could have happened exactly as it did.

It's also worth nothing that commercial and investment banks are the same in Canada and they have no Glass-Steagal act. But they were ok.

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt

Glass-Steagall wouldn't have prevented the losses...

...But it would have prevented those lossed from being socialized. Of course investment bankers are free to gamble with their money any way they want. It would have prevented those losses from being socialized with FDIC insurance. This worthless junk has no business being insured along with grandma's pennies.

True that it was not only Reagan-Bush tax cuts which created the debt, no one said that. It was a combination of those, doubling the defense budget in peacetime, and bailouts. Crazy spending is exactly right.

A man who views the world the same at fifty as he did at twenty has wasted thirty years of his life.
-- Muhammad Ali

Excellent points.

Thank you.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Lot of good information on Reagan tax cuts on DailyPaul.

Search & you will find: President Reagan, David Stockman, Twain

"Bush's cutting taxes?" No results found. Did you mean Bush-whacked?

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

sigh

Bush's tax cuts:

Economic Growth and Tax Relief Reconciliation Act of 2001:

* a new 10% bracket was created for single filers with taxable income up to $6,000, joint filers up to $12,000, and heads of households up to $10,000.
* the 15% bracket's lower threshold was indexed to the new 10% bracket
* the 28% bracket would be lowered to 25% by 2006.
* the 31% bracket would be lowered to 28% by 2006
* the 36% bracket would be lowered to 33% by 2006
* the 39.6% bracket would be lowered to 35% by 2006

Jobs and Growth Tax Relief Reconciliation Act of 2003:

Increased both the percentage rate at which items can be depreciated and the amount a taxpayer may choose to expense under Section 179, allowing them to deduct the full cost of the item from their income without having to depreciate the amount.

In addition, the capital gains tax decreased from rates of 8%, 10%, and 20% to 5% and 15%. Capital gains taxes for those currently paying 5% (in this instance, those in the 0% and 15% income tax brackets) were scheduled to be eliminated in 2008.

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt

[Take deep breath... Sigh... Porch swing jolts.]

A percent of this. A percent of that... A faith based message. You point out percentage reductions of taxes. Confiscation of our wealth continued unabated. The net was very negative. Burdens were increased. Bush whacked.

Sent our soldiers hither and thither. No soldier left behind.

War sent balance of payments to points unknown. There was no reduction in government confiscation of our wealth. Destruction reigned down.

Good day Sir.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Beware of newspapers & related misinformation.

End the Fed. Much of what you wrote is fine my me; however, let us look behind the curtain. The Fed & its minion banks loan "legal tender" into existence. The Fed creates National Debt... out-of--thin-air. Its banks create loans... out-of-thin-air. Customary & usual... but, far from OK.

Royal Bank of Canada is the Central Bank up North. Not OK. Tis of the same ilk as the Fed. Their banks are not OK... Perhaps, less bad. There accounting is out-of-thin-air, the same as the Fed. End the Fed! - by Ron Paul.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

my point

My point is that the banks engaged in the risky behavior of buying mortgage back securities. They bought them because they had decent yeild and were rated AAA. Turns out they sucked. But instead of taking the losses, the banks that bought them got bailed out by taxpayers. Glass-Steagal wouldn't have prevented this at all. Obviously the Fed needs to be ended. They're just not relevant to the point I was making about Glass-Stegal.

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt

My point is the hole so called monetary system is in shambles.

"Out-of-thin-air" comes "legal tender" & loans?

Your points are details. I generally agree & did not pay them much mind. Sorry. I will address them, as they are interesting to you and are generally accepted as accurate observations by keen observers of this mayhem.

Banks create "legal tender" many ways. None of which you acknowledge. That is quite normal in this day & age.

"Banks engage in risky behavior." Yes, no doubt.

"They bought [mortgage packages] because they were AAA..." As oft reported, they followed they own silly rules, knowing full will how they were created. the Boyz were the creators. Do you think Warren Buffett owning substantial interest in Moody's, Well's Fargo, General Re, et al have anything in common? Why was he so quick to buy dismal failures awaiting bailouts, tax specials, & government guarantee's? Twas an inside job. Your point on Glass-Steagall was generally correct. I have written more if you search DailyPaul.

In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, "improper banking activity", or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors' money. Additional and sometimes non-related explanations for the Great Depression evolved over the years, and many questioned whether the GSA hindered the establishment of financial services firms that can equally compete against each other. We will take a look at why the GSA was established and what led to its final repeal in 1999...

New Rules of the Gramm-Leach-Bliley Act 1999.

[No derivative gambler left behind act. Actions subject to this new law defined as "not gambling."]

The limitations of the GSA on the banking sector sparked a debate over how much restriction... [Fluff deleted for brevity.]

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

fireant's picture

I think Twain's point is relevant.

Perhaps in a larger context than what you refer, but if there were no Fed with it's merry band of primary dealers, MBS and many other risky instruments likely wouldn't exist, and there would be no need for much of the regulation.

Undo what Wilson did

Well said. Brief. And I agree.

"If their were no Fed with its merry band...." - Firant

Agree!

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Please read

Yeah, you seem to be starting a conversation with yourself about the Fed.

I wrote my post to address one specific issue. Namely, that the people running around saying "glass steagle would have saved us!" are wrong. Glass-Steagle is irrelevant to the bank crises as it actually unfolded. Our problem has to with with bailouts, bad rating agencies, banks taking risks, fractional reserve banking, and, yes, the Fed which enables the whole system.

My point was simply to correct people, usually well meaning people on the left that think a simple piece of regulation such as Glass-Steagle would have been (and will be again) the solution to all our woes. Simply letting commercial banks and investment banks combine wasn't was did us in.

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt

I agree with what you write here.

I react to Glass-Steagall pretty much in line with what you write. Many feel that restoring the Glass-Steagall Act would be better than what we have now. It is not so simple. I am neutral on on Glass-Steagall Act; I am very negative on the Commodity Modernization Act, 1999.

I have posted to this forum & others here about Glass-Steagall Act, 1933 & the Commodity Modernization Act, 1999.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

reedr3v's picture

bump

.

Thx.

Interesting info. I need to study that more, but understanding all these things like mortgage backed securities, collateralized debt obligations, and etc. and being able to describe the what they are and what they mean, and how glass-steagle would have effected them is a level I haven't reached yet. Did we have these financial instruments when we had glass-steagle?

no kidding

I agree. All this stuff can really make your head spin after a while! Well, we had Glass-Steagle since the 30's since (as because of) FDIC, so it's been around awhile. Mortgage backed securities have been around in their current form since the early 80's, I believe

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt

Ok! so 1 decade.

So, here's a quote from the above article:

"Glass-Steagall began to be dismantled under Ronald Reagan, with Bill Clinton finishing the job for Wall Street in 1999."

So, by the information you gave, stating that Mortgage Backed Securities have been around since the early '80's, and Glass-Steagle was repealed in '99, there's a maximum 10 year period where we had both at the same time.

Is there anything we can glean from this time period that would be relevant?

Thx for the reply!

Best get out of the way

so people can work and operate a business, government.

Dumping $75 Trillion on taxpayers? How rude. Who will pay?

5 US Banks holding $250 Trillion in derivatives:

  • $250 trillion toxic derivatives held by US banks
  • -$75 trillion from B of A dumped on taxpayers
    _____
  • $175 trillion to be determined (TBD)

Larger than US:

  • $120 trillion unfunded liabilities (future promises)
  • +$15 trillion National Debt (un-audited)
    _____
  • $135 trillion promised

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

What happens to Federal Reserve members when they fail?

General Motors was nationalized, such was their agreement?

Read the agreement:
http://www.llsdc.org/attachments/files/105/FRA-LH-PL63-43.pdf

Free includes debt-free!

what Goodman says in the post

"All the banks on Wall Street that would have failed should have failed. Their speculator counter-parties should have been bankrupted, and their retail depositors should have been made whole. The retail divisions could have been temporarily nationalized and sold off as soon as possible to more prudent management. Had this occurred, America would have experienced a deep but very temporary economic downturn, and, by now, the downturn would be over."

http://seekingalpha.com/article/301260-bank-of-america-dumps...

A man who views the world the same at fifty as he did at twenty has wasted thirty years of his life.
-- Muhammad Ali

"shall be paid and become the property of the United States"

Here are the excerpts I was looking for from the Federal Reserve Act of 1913 http://www.llsdc.org/attachments/files/105/FRA-LH-PL63-43.pdf

Sec. 6
If any member bank shall be declared insolvent and a receiver appointed therefor, the stock held by it in said Federal reserve bank shall be canceled, without impairment of its liability and all cash-paid subscriptions on said stock, with one-half of one per centum per month from the period of last dividend, not to exceed the book value thereof, shall be first applied to all debts of the insolvent member bank to the Federal reserve bank, and the balance if any, shall be paid to the receiver of the insolvent bank. Whenever the capital stock of a Federal reserve bank is reduced, either on account of a reduction in capital stock of any member bank or of the liquidation or insolvency of such bank, the board of directors shall cause to be executed a certificate to the Comptroller of the Currency showing such reduction of capital stock and the amount repaid to such bank.

Sec. 7
... Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid and become the property of the United States and shall be similarly applied.

Free includes debt-free!

So the bottom line is, that

So the bottom line is, that after everyone else gets paid, the American people get left holding a bag of crap.