BAC

A few days back we asked whether if as part of the now certain Irish austerity package, the imminent rise in the corprate tax rate for offshore companies based in Ireland would result in a crunch in the bottom line for US corporations such as Google. Now that a hike from the prevailing 12.5% rate is inevitable, US companies have launched an offensive to make it clear that only Irish citizens will be subject to the critical austerity measures. The Telegraph reports that "the Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's low corporation tax rate is raised." If companies, which are purely circumventing much higher US corporate tax rates, also have to share the burden, they will simply depart from the already insolvent country, leaving it with even less tax revenues, thus accelerating the toxic loop of greater insolvency coupled with even less revenue. And since the IMF is backed primarily by the US, which is end-domicile to the bulk of the corporations in question, it is obvious that corporations have all the leverage and will most certainly get their wishes, further widening the chasm between the "corporation" and the simple Guiness-drinking, potato chewing peasant. In the brave new world, the pursuit of life, liberty and happiness appliues only financiers and corporations. Everyone else has been relegated to footnote status.

It seems like yesterday that David Tepper uttered the famous last words: "What will go up? EVERYTHING." Too bad, then, that one look at Mr. Appaloosa's holdings today shows a complete bloodbath (yes, don't adjust your monitor, that IS an 11 handle on BAC). Unless, of course, between June 30, and just after his now legendary CNBC interview, the Chatham, NJ-based hedge fun manager was actually selling his positions to the creme of the crop of CNBC viewer gullibility. But that would of course never happen. That said, we can't wait for his Q3 13F to be proven right. Oh, and John Paulson's recovery fund is fast approaching 2010 P&L lows. Presenting, for your gloating enjoyment, Tepper's top 25 holdings. Note holdings #1, #2, #4 and #5. As a reminder, CapitalIQ has Tepper's equity holdings at $2.5 billion.

Both Bank of America and Wells Fargo are refusing to go with the euphoric melt up flow, at least in stocks, and are now wider by about 13 bps each (latest rerack: BAC 177.5 +13.50; WFC 115.50 +12.5) as investors begin fretting about just how serious foreclosure fraud may be, and its impacts on banks. And yes, this is isolated to foreclosure fraud, as all the other non-originator-cum-servicers are flattish to tighter on the day (oddly, Block is wider by almost 100 bps to 515 from 422.5, and we can't quite explain the reason just yet). As we pointed out earlier, when JPM stock was still up for the day, look for this credit weakness to spill over more into stocks as Fed-frontrunners realize that the Fed, with even a $4 trillion balance sheet, where it will be in a year, will be unable to keep all the moving parts on the banks' $15 trillion liabilities in check (not to mention the $18 trillion in shadow liabilities). Bottom line - very soon foreclosure fraud will finally start to be priced into financials first, then everything else. It already has infected credit.

Bank Edition for Wednesday ~ 12 daily / weekly technical profiles of : Bank of America (BAC); Citigroup (C); Goldman Sachs (GS); JP Morgan Chase (JPM); Morgan Stanley (MS) & Ultrashort Financials (SKF)

To us, the confirmation hearings last week before the Senate Banking Committee only reaffirm in our minds that Benjamin Shalom Bernanke does not deserve a second term as Chairman of the Board of Governors of the Federal Reserve System.

* Over (Paulson Correct)
* Under (Paulson Incorrect)

We commented yesterday on the absurd (or threatening) hypothesis that the Fed would drain all $1 trillion in excess reserves by the end of March, 2010. Today, we reenter the fascinating world of JPM, Goldman and Pimco Treasury advisors, where inflation is relegated to a mere marketing device, and passing the buck to the last bondholder is a game unto itself.

Bank of America stock up 2% at last check, while CDS is 5 bps wider. Someone please explain that one to us.

Cramer calls for a 35% pop in BAC. What's he selling?

Ken Lewis is on CNBC touting the "BoA story", sees the market bottoming out and is generally sunny across most business lines. When asked about the Merrill business lines, apparently "trading is fine" and "investment banking is doing ok... some equity underwritings!"