Merrill Lynch moving derivatives to BofA FDIC insured bank unit

October 19, 2011 by · Leave a Comment
Filed under: Industry News 

Utter garbage.  How can we sit back and let a bank move a massive load of liabilities to a banking unit that has deposits and is backed by the U.S. taxpayers via the FDIC?  No surprise the Federal Reserve didn’t see a problem because they would not be first in line to make that banking unit whole again if something went wrong and trigger the CDS and whatever, other exotic contracts Merrill Lynch may have.  We are just increasing the risk on this massive institution.

We need to quit using this line of global uncompetitiveness as a reason why our deposit institutions need to act like investment banks and take those type of risks.   If it is that important to Bank of America or any other bank (not to single them out), they just need to make BofA Investments or whatever so they can run that operation off their own capital and investors so they can take that risk so try and increase profits.  Our banks just need to be competitive in our home market, America.

If other countries allow their “safest” banks jump off a cliff, should we compete to let ours?  Even William K. Black is mentioned in the article and he thinks we should have tight runs against this type of practice.   Just so people know, I am not against banks or banking, personally I find them fascinating companies and I love their history, but what we have these days is nothing like the old days.  When I say that, I mean the sense of duty and prudence is not their and that is a loss for the industry as a whole.

Bloomberg (Bob Ivry, Hugh Son and Christine Harper): 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.

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FDIC’s Shelia Bair is cautious on authority to break up “too big to fail” banks

November 24, 2009 by · Leave a Comment
Filed under: Policy News 

Looks like Chairman Bair is getting in line with the Administration’s thinking that breaking up the “too big to fail” banks.  They think it is better to regulate them or create “glass ceilings” for firms that are systemically important to the U.S. economy.   Jamie Dimon from JPMogranChase did an op-ed piece stating he would rather not get bailouts and fail then have artificial ceilings in place.  I wish this statement would of come out about 12 months earlier and then it would of garnered more creditability.

It uses interesting that Ms. Bair says she wants to deal with these large financial institution but does not seem to support downsizing or limiting what financial activities commercial banks can engage in oppose to investment banking institutions.  In my opinion to have a real market economy and functioning democracy, we can never have any organization that is “too big to fail” other than a handful of defence-contractors that are in our national security interest and even those companies should not be allowed to engage in business practices that make them a systemic risk to our economic livelihood.

Reuters, Washington D.C. – A top U.S. bank regulator on Tuesday said lawmakers need to be careful about moving forward with a proposal that could break up the largest financial institutions, while also voicing support for its objective.

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“Too big to fail” must end for all according to FDIC’s chairman Sheila Bair

October 4, 2009 by · Leave a Comment
Filed under: Policy News 

I agree with this policy but having it actual becomes practice is another.  Problem is that letting large firms at this time is not politically feasible currently.  We have administration that is filled with financial insiders that did everything they could to prevent any of these firms from failing under the fear-driven threat that the entire economic system would collapse if we did not bail them out fully other than a few players that we obviously not as “politically connected” as the most established firms.  I still believe that if we would of let capitalism take its course we would of have a speedy downturn and much of this bad debt would of been defaulted on and that would of brought back confidence in markets and we would be seeing real job driven growth in the coming year.

Instead, we have pledged our nations credit to bail out system out without any guarantee that we actually recovering and it looks like we will not see any real structural change or oversight that might prevent this type of reckless leverage to happen again.  We need our representatives to show real leadership and enforce our existing rules on the books and investigate all the obvious fraud that has happened and set the proper precedence for future generations.

Reuters, Istanbul - The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the “too big to fail” doctrine and shrink the shadow banking system that operates outside the reach of regulators.

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FDIC closes an additional 5 U.S. banks to bring total to 69 failed banks for 2009

August 1, 2009 by · Leave a Comment
Filed under: Bank Failure 

Wow, the U.S. bank failures are picking up speed in 2009.  We should see premiums increase in the coming months or some other emergency action to bring more backing to the FDIC fund.  Just in these closure alone we have approximately $1 billion more in deposits.

Many of these banking institutions are holding commercial, home-builder, equity lines along with normal loans.  Many of these deals were not setup to survive a protracted downturn and only because of lax lending standards they made sense and were approved.  This debt needs to default and get pushed through the system so we can achieve balance.  So every time I hear one of these announcements it tells me we are one step closer to a “real” recovery.

News (Reuters):

Bank regulators closed five banks on Friday, bringing the number of failures so far this year to 69 as the struggling economy and falling home prices take their toll on financial institutions.

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Seven more U.S. banks fail going into the holiday weekend, brings total to 52 for 2009

July 3, 2009 by · Leave a Comment
Filed under: Bank Failure 

The market does not like this news. The Dow down over 2.5% at the time of this writing. This does seem to be accelerating and that does not bode well as a sign for future events to pass.  We are going to see more regional and local banks go bust as the loans on their books go into default and that make their capital reserve inadequate  for what regulators are requiring.  This also is putting a severe strain on the FDIC and its funds.  It already has had raise rates this year to cover the number of banks that went bust in 2008.

News (Bloomberg):

Six banks in Illinois and one in Texas were seized by regulators as the deepening financial crisis pushed the toll of failed U.S. lenders this year to 52, the most since 1992.

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