Is Obama a made man? $800 TRILLION in derivatives, bad bets...

[WhiskeyGirl]

Derivatives are bad bets, and Americans always seem to be on the hook for paying them off...paying off the gambling debts the rich, political, insider class. Always in debt to the international bookie consortium. 

Is Barack Obama the latest made man?

Another example of 'immoral but not necessarily illegal'?

"BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit"

Title kinda looks harmless...

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.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

In the past, the FDIC stayed away from such risky transactions. 

Some like to say derivatives are like 'insurance'...no way.  I've noticed that derivatives seem to be a kind of gambling - making bets that a reasonable person can see are bad from the get go.  Making bad bets.  Betting on assured failure, who profits?  Not sure.  I know it's not the American people. 

'Our' financial collapse was blamed on derivatives...I don't know anyone who sold them, anyone who earned a commission, anyone who is an investment banker...  How much commission/profit to salepeople make on derivatives?

I've read there are estimated to be around $800 TRILLION floating around.  Why exactly do they exist in the ether world?  Haven't figured that out.  It seems like a fairytale lifestyle.  Just sell some derivatives, make big fat paycheck, and dump the bad news on Americans...generations of Americans.

Is Obama a made man?  Why hasn't he stopped this madness?  Is he waiting for an American fall? 

"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..."

"“Congress doesn’t want a bank’s FDIC insurance and access to the Fed discount window to somehow benefit an affiliate, so they created a firewall..."

read more here - http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

If this were an insurance contract for someone will terminal heart failure, on life support, and in a coma, likely the insurance company wouldn't issue a policy.  However, today, we have Obamacare.  How much premium for say two weeks of expensive terminal treatment?    Likely the company would have to refund the 'unused' premium too.

Beck has a source that reports the following:

    Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.

    This is a recipe for Armageddon. Bernanke is absolutely insane. No wonder Geithner has been hopping all over Europe begging and cajoling leaders to put together a massive bailout of troubled banks.

    His worst nightmare is Eurozone bank defaults leading to the collapse of the large U.S. banks who have been happily selling default insurance on European banks since the crisis began.

Happily selling bad bets since the 'crisis' began?  Anyone expect Greece to actually pay it's bad debt?  We've been watching the debt and mob action for over two years...

Is Obama a made man? Happily continuing the tradition of wealth transfer to the political elite special interest class?  Derivative salesmen?

"A CDS is a credit default swap. It’s a lot like an insurance policy in that it requires the seller of the CDS to compensate the buyer in the event of loan default. Bank of America and JP Morgan have been selling these at an almost breakneck pace."

An insurance policy has an underwriter that should take an HONEST look at the risk.  Need a policy on bad Greek debt?  Well...have to cover costs, admin costs, and commission.  So, we need to collect enough for the INSURANCE company to pay off on this highest of risky business...

Likely the one needing protection from the risk couldn't afford a traditional policy.

Who exactly needs to be insured from Greek default?  Why would anyone sell a policy after the insured is already dead?

Is Obama a made man?  Just another in a long line support elite special interests instead of the American people?

beck article here - http://www.theblaze.com/stories/shock-report-federal-reserve-to-backstop-bank-of-americas-european-derivatives/

Just my humble opinions.

[WhiskeyGirl]

Why do taxpayers keep getting stuck with the bad gambling debts!!!

On the other hand, retail banks are much safer, because they’re protected by the FDIC. If a retail bank is a derivatives counterparty, then it doesn’t need to post nearly as much collateral. The derivatives aren’t themselves insured by the FDIC, but they have extremely senior status, which means that the bank can use its deposit base to pay off derivatives counter parties. And then if there isn’t enough money left to pay depositors, the FDIC will step in and make those depositors whole.

So Bank of America decided to move some unknown quantity of derivatives from Merill Lynch — which doesn’t have an FDIC-insured deposit base — over to its Bank of America retail subsidiary, which does.

The FDIC was not happy about this — it makes it more likely that they will have to pay out in the event that Bank of America runs into trouble. And when the FDIC pays out, that’s a hit to taxpayers, the letter of the law notwithstanding. Jon Weil explains:

    The market harbors serious doubts about whether Bank of America has enough capital…

   

Dodd-Frank lets the FDIC borrow money from the Treasury to finance a seized company’s operations for as long as five years. While the law says the FDIC is supposed to tap the banking industry to pay for any eventual losses, it’s hard to imagine the agency could ever charge enough to cover the costs from a failure at a company with $2.2 trillion of assets

Why do taxpayers keep getting stuck bailing out all these risky casino banking deals?

When does it end?

read more here - http://blogs.reuters.com/felix-salmon/2011/10/20/bofa-puts-taxpayers-on-the-hook-for-merrills-derivatives/

Why not let the banks fail, let the foreigners extradite the bankers, and let the court cases begin?

just my humble opinions

[WhiskeyGirl]

Who exactly are they paying the $54 TRILLION to?

Maybe they need to be taxed 100% on that $54 TRILLION???

How long has this been going on?  How many TRILLIONS has the Fed given away?

[WhiskeyGirl]

"Is Bank of America preparing for a Chapter 11?"

Is Bank of America preparing for a Chapter 11?

    You can argue that this is just normal business, the other big banks have their derivatives operations largely in the depositary. But BofA has owned Merrill for over a year and a half, and didn’t undertake this move until it was downgraded. Goldman and Morgan Stanley remaining big players in this business and don’t have a large depositary. If this was all normal business, BofA would have done this a while ago, and not in response to market pressure, and they would have gotten the FDIC on board. The way this was done says something is amiss.

Correct. To my earlier post regarding the need for a restructuring at BAC, “Housing, debt ceilings & zombie banks,” the move to put the derivatives exposures of Merrill Lynch under the lead bank could be preparatory to a Chapter 11 filing by the parent company. The move by Fannie Mae to take a large chunks of loans out of BAC, the efforts to integrate parts of Merrill Lynch into the bank units earlier this year, and now the wholesale shift of derivatives exposure all suggest a larger agenda.

$800 TRILLION in derivatives out there?  Waiting to fail?  Who has that much to gamble with?  Who REALLY expects someone else to pay up?  Why don't they make all the players public?  Follow the money?

read more here - http://blogs.reuters.com/christopher-whalen/2011/10/19/is-bank-of-america-preparing-for-a-chapter-11/

from the comments -

BoA should not be allowed to file bankruptcy… they should be prosecuted for fraud, violation of SEC rules, violations of banking rules and regulations…
These people need to see jail time… I steal $10 and go to jail for 10 years, these people steal 10 billion and get a bonus… And you call that capitalism…. I call it grand theft…

In Obama speak - 'probably immoral, not necessarily illegal'

Obama a made man?  The taxpayer ripoff continues?

Is America being turned into a global 'bad' bank for the job rotation, Fed, Treasury, banks, special interests and corrupt players?

Who's looking out for Main Street?

just my humble opinions

[WhiskeyGirl]

This changes the picture completely. This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough indeposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.

Why would the casino gamblers be first in line?  Did any one of them have the TRILLIONS to pay off those bets when they made them?  Who did they think would make good on TRILLIONS of derivatives gone bad?  Did they have TRILLIONS when they made the contracts?  Where did they expect the TRILLIONS to come from?

http://crooksandliars.com/susie-madrak/bank-america-trying-stick-taxpayers-7

from the comments -

Bill Clinton signed the legislation that essentially repealed Glass-Steagall and allowed this to occur.

Obama wants states' Attornies General to give in to the banks and just settle with them over the wire fraud and illegal foreclosures.

Obama has not prosecuted a single Wall Street banker responsible for our economic collapse.

What do you all think is going to happen here?

It’s easy now to arm-chair quarterback. At that time, the CDO (championed by JP Morgan) hadn’t even been invented yet. They should have seen the collapses coming based on the bank collapses of the early ‘30s, but nobody cared to look at the history.

When Clinton signed that, Banks were saying they needed their hands to be untied in order to compete globally in the new financial markets. Even today, they are saying they don’t want their hands to be tied. Regulations like Glass-Stieagall don’t tie their hands. They keep their grubby hands from squeezing around our throats.

Did all those parties to the derivatives have the money to pay off if they lost when they made those bets?

Why not make the derivatives public so everyone can follow the money?  How many decades back do these TRILLIONS go?

[WhiskeyGirl]

"You Have Been Robbed Big Time "

This changes the picture completely. This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. [Background.] So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.”

Think back to IndyMac and OneWest.  Big scandals that didn't get much press.  Timmy and the Fed were busy 'stress' testing the little and medium sized banks on Main Street. 

Are they to big to fail?  In danger of failing?  From memory, I believe some were liquidated against their will.  Really in danger of failing?  Or, just ripe plums for the picking?

With IndyMac and OneWest, there was a guy who wondered out loud about the government people 'it's like they were drunk or something'...such was the AWESOME perhaps unbalanced deal the buyers/investors got on those assets.

What did they get?  The deposits.

Not a lot of transparency, from what I remember.  No rhyme or reason to who got closed and who stayed open.  What business did the Fed (a private bank) have to find out the secrets of all these banks?

The crazy thing?  The biggest (to big to fail) banks seemed to get bigger...go figure!  Why, why, why would they let that happen?  Didn't make sense.

Maybe they were shopping for deposits?  If you knew in 2005 all those bad derivatives were about to go belly up, how would you set yourself up to make some money?

Hmmm...put derivatives, via the new bankruptcy law first in line for payment?  Derivatives, the giant casino gambling $800 TRILLION dollar gambling bets? 

If you have not the money to pay off the bookie, why are you making the bet?  If you have not the money to pay off the bookie, why should taxpayers or the FDIC make good on your bad bets?

If you're sitting on TRILLIONS of derivatives gone bad, how do you get your money?  Did you put up any money?  Hmmm...maybe you (or your counterparty) find some deposits...

Over at Dailykos, Marie notes:

“The “genius” of Bernanke and Geithner appears to be that they kicked part of what they called a liquidity crisis can down the road and into the FDIC house. Now, instead of TARP II and/or more FED bailouts, the FDIC will be the insurer and loss-payer. That spreads the costs of the risk right down into the pockets of every federally insured customer of a financial institution. How that works is the FDIC raises its rates to it’s members and they in turn pass along the increased costs to customers.

It’s been a capital crisis since the housing bubble began to pop. A question that nobody wanted answered was how deep the hole was. A second question was how to stick it to the 99%. A question we should be asking is why the credit rating bureaus waited until now to downgrade and the counterparties silently bided their time. It’s not as if those derivatives are significantly more impaired today than they were last year. Is it too ludicrous to mention that last year there were two women familiar to dKos readers standing in the way of more dead-of-night deals for the 1%? Elizabeth Warren and Sheila Bair, Chairperson of the FDIC until July 8, 2011. The wrong two people were most definitely let go.”

read more here - http://www.blogforiowa.com/2011/10/22/you-have-been-robbed-big-time/

How many small bank deposits were gobbled up by the big 'too big to fail' bunch?  How many deals that didn't make the media?

Privatize profits, socialize losses, or the looting continues?

Where are the folks that are supposed to be looking out for Main Street?

just my humble opinions

[WhiskeyGirl]

Who are the counterparties?  Don't the American people have the right to know?

[WhiskeyGirl]

She favored “market discipline” — meaning shareholders and debt holders would take losses ahead of depositors and taxpayers — over bailouts, which she abhorred. She didn’t spend a lot of time fretting over bank profitability; if banks had to become less profitable, postcrisis, in order to reduce the threat they posed to the system, so be it. (“Our job is to protect bank customers, not banks,” she told me.) And she was a fierce, and often lonely, proponent of widespread mortgage modification, for reasons both compassionate (to help struggling homeowners stay in their homes) and economic (fewer foreclosures would help the troubled housing market recover more quickly).

'...immoral, not necessarily illegal...'

Somehow, I think taxpayers are being fed the $800 TRILLION piecemeal.  $80 Trillion here, $50 TRILLION there...

“But they certainly could have been less generous. I’ve always wondered why none of A.I.G.’s counterparties didn’t have to take any haircuts. There’s no reason in the world why those swap counterparties couldn’t have taken a 10 percent haircut. There could have at least been a little pain for them.” (All of A.I.G.’s counterparties received 100 cents on the dollar after the government pumped billions into A.I.G. There was a huge outcry when it was revealed that Goldman Sachs received more than $12 billion as a counterparty to A.I.G. swaps.)

Bair continued: “They didn’t even engage in conversation about that. You know, Wall Street barely missed a beat with their bonuses.”

“Isn’t that ridiculous?” she said.

What are the chances that the next failure of derivatives will take a hair cut?

Read more of this lengthy article here - http://www.nytimes.com/2011/07/10/magazine/sheila-bairs-exit-interview.html?pagewanted=all

Why would anyone put derivatives ahead of depositors when it comes time to distribute the collateral?  A gambling debt or deposit?  Who should get paid first?

Just my humble opinions

Why are derivatives allowed to get paid off first?  Is there any real good reason derivatives need to exist at all?  I've never seen an argument to support their continuing on.  What are they good for?  Raiding taxpayer pockets?

...As Paulson, Geithner and the Federal Reserve chairman, Ben Bernanke, raced to bail out banks and companies like A.I.G., Bair resisted, fearing that they were being overly generous by putting the interests of bondholders over those of taxpayers. I couldn’t help recalling that the last female financial regulator to be labeled difficult was Brooksley Born, the head of the Commodity Futures Trading Commission in the mid-1990s. Fearful that derivatives were becoming a threat to the financial system, Born wanted to regulate them but was stiff-armed by Alan Greenspan and Robert Rubin.