This page has been archived and commenting is disabled.

Bank Of America As An Analog To WorldCon And, Of Course, Horseshit

Tyler Durden's picture




 

Trust Bloomberg's Jonathan Weil to put two and two together, and to remember that everything new is just well forgotten old. In this case Bank of America. And we are not talking comparisons to Lehman (or even SocGen) - those are boring. No, it is much more fun to compare the insolvent bank to another world con, in this case WorldCom. As Weil reminds us, the news that Moynihan's last stand was considering a tracking stock reported earlier by the WSJ, as a means to demonstrate to the Fed its "viability", is nothing short of the comparison of WorldCom's last ditch in kind method, which none other than a WorldCom director likened to, well, horseshit.

Taking a step back, Weil reminds us that there are a lot of reasons why a desperate company might want to issue a tracking stock. "None of them are good. One company that did it in 2000 was WorldCom Inc., less than two years before it collapsed in one of the greatest accounting scandals ever. Here are some excerpts from a March 2003 investigative report by WorldCom's audit committee discussing the company's use of the gimmick."

So what did the report say?

"In WorldCom's November 1, 2000, press release, Ebbers said that the trackers enabled 'the respective businesses to achieve greater management and resource focus to execute business strategies that work most effectively for each' and 'create greater shareholder value by providing shareholders with two distinct, clear and compelling investment opportunities . . . .'

 

"By contrast, notes taken by the general counsel of corporate development, Bruce Borghardt, at a September 2000 board meeting indicate that Ebbers told the board that the tracker was 'financial engineering' and, by putting poorly operating businesses -- the 'dogs and cats' -- into MCI Group, they could show double-digit revenue growth in WorldCom Group. Borghardt’s contemporaneous notes also reflect that one director said that the tracker was the equivalent of 'put[ting] manure in the closet' and that it would 'still smell.' "

So aside from the vivid visual what did tracking actually achieve? Well, nothing:

"According to its public filings and press releases, the WorldCom Group stock tracked the 'primary growth drivers of the company' based on services provided to corporate enterprise customers; the MCI Group stock tracked 'the company’s high-cash flow' generated primarily by consumer and wholesale long-distance customers. By all accounts, the process of allocating the costs and revenues between the two stocks evolved over time and was highly subjective. WorldCom was not simply divisible into two clearly defined entities with distinct costs.'"

On the other hand BAC is perfectly divisible into two entities: BAC ex-CFC and CFC. The problem is that spinning off CFC, or rather is contingent liabilities involves two things: i) bankruptcy or ii) a spin out into an equity funded trust. Both of these mean the existing equity value will drop to about $0.00... or $0.01 tops.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 09/02/2011 - 15:43 | 1627561 chunga
chunga's picture

Come on Tyler...let's have another "Bear Market Open Thread" like two weeks ago. It's Friday.

Fri, 09/02/2011 - 15:47 | 1627569 lizzy36
lizzy36's picture

something tells me you may get your wish.

Fri, 09/02/2011 - 16:15 | 1627712 AldousHuxley
AldousHuxley's picture

AND it is a long weekend for 85% of those who are still employeed.

 

Labor day is a good time to reflect how labor gets screwed over the interest of capitalists' greed: Money > Mankind

 

I'd actually would like to see some unions thugs fck shit up in DC and NYC.

Fri, 09/02/2011 - 16:22 | 1627740 TuesdayBen
TuesdayBen's picture

"I'd actually would like to see some unions thugs fck shit up in DC and NYC."

No problem, the Mets are in town for a three game series against the Nationals this weekend....

Fri, 09/02/2011 - 15:52 | 1627598 tekhneek
tekhneek's picture

Yes, lets.

Fri, 09/02/2011 - 16:04 | 1627648 chunga
chunga's picture

FHFA suing Barclays and Merrill Lynch too. Yippee! Next thing you know we'll get the "junk" button back. It was so anti-social.

Fri, 09/02/2011 - 16:22 | 1627744 candyman
candyman's picture

since we are cleaning house lets bring back the mark to market.

Fri, 09/02/2011 - 16:07 | 1627658 Western
Western's picture

let them eat cake

Fri, 09/02/2011 - 15:44 | 1627565 wang (not verified)
wang's picture

Buffett invests in horseshit

 

 

 

 

Fri, 09/02/2011 - 15:49 | 1627575 nathandegraaf
nathandegraaf's picture

Quadruple A rated horseshit. 

 

Fri, 09/02/2011 - 15:50 | 1627584 anony
anony's picture

Buffet doesn't invest, or gamble. 

He gets the United States government to back his 'rescue' plays.  This takes the government off the petard, appears to put him on it instead (private enterprise and all that horses doofers), and when something turns sour WE, as in the taxpayers,  reimburse him thru a bailout of the institution.

He can't lose. Doesn't.  He makes money regardless of what happens.

Nice..

 

Fri, 09/02/2011 - 16:19 | 1627730 AldousHuxley
AldousHuxley's picture

Buffett is JP Morgan of this depression....the last bankster standing rescuing his own.

Fri, 09/02/2011 - 16:59 | 1627908 Jasper M
Jasper M's picture

I'm taking  the under on that trade

Fri, 09/02/2011 - 15:56 | 1627613 Chuck Walla
Chuck Walla's picture

whatever he does, he certainly spews a lot of it.

Fri, 09/02/2011 - 23:34 | 1628883 Captain Obviousness
Captain Obviousness's picture

But only if it's too shitty to fail.

Fri, 09/02/2011 - 15:46 | 1627568 caerus
caerus's picture

this reeks of desperation (and horseshit)

Fri, 09/02/2011 - 16:42 | 1627831 RockyRacoon
RockyRacoon's picture

Talk about desperation...  Dick Bove on CNBS just now talking up B of A.   There was desperation in his voice.   What do those guys have on him anyway?    Pictures and credit card receipts to prove whatever indiscretions they have on the poor fool.

Fri, 09/02/2011 - 17:55 | 1628203 Cash-NonCash
Cash-NonCash's picture

"the fury against this company will weaken..." said Dick on 23 August.

I'm not furious, because my puts are on fire.

Dick.  Dick? What have you been up to Dick? Ooooooh Diiiiiiiiick...

 

Fri, 09/02/2011 - 15:48 | 1627573 LoneStarHog
LoneStarHog's picture

Hey! As an equine lover and former breeder/rancher I resent the degrading tone toward something as wonderful as horseshit.  Many days were spent with an apple rake cleaning stalls to the wonderful aroma and visuals of this fine product. /Rant Off

Fri, 09/02/2011 - 15:57 | 1627620 caerus
caerus's picture

i too come from a tx ranching family...course i grew up around shit of the bovine variety

Fri, 09/02/2011 - 20:01 | 1628533 DCFusor
DCFusor's picture

What's been fun in the rural boonies is these new hobby horse "farmers" that have moved into the area as the old folks die and their kids split up the big places into mere 20-50 acre lots.  They think they're returning to nature and all (it IS nice here).  Hosrsehit seems to scare and/or disgust them though.  They'll even pay to have it taken away (and will sometimes do the collecting for removal themselves).  As an organic gardener - shit by any name can smell pretty sweet in a strange sort of way.  HS smells not much at all...

Not all things of value are golden and shiny.  How about a large patch of the richest soil on earth, having had many tons a year of organics put on it?  Heh.

Fri, 09/02/2011 - 15:49 | 1627577 Greater Fool
Greater Fool's picture

Meh, still might buy some when it gets to 6. I need a little excitement in my life.

Fri, 09/02/2011 - 15:54 | 1627607 tekhneek
tekhneek's picture

Excellent idea. While you're at it sell your house, car, precious metals and buy NFLX.

Fri, 09/02/2011 - 16:11 | 1627684 Greater Fool
Greater Fool's picture

Wow, a lot of the funny people here have no sense of humor. What's not to like about being able to buy a share of the biggest bank in the US by assets for about what it costs you to get a supersized value meal?

Fri, 09/02/2011 - 16:14 | 1627708 chunga
chunga's picture

When you're hungry a whopper always seems like a good idea...until it lands in your stomach like a bag of cement.

Fri, 09/02/2011 - 16:17 | 1627726 Greater Fool
Greater Fool's picture

A lot of Americans would probably live longer if, say, 1 time in 3 when they were going to buy the whopper they bought a share of BAC instead. Moynihan should do an infomercial.

Fri, 09/02/2011 - 16:00 | 1627628 eftian
eftian's picture

a little excrement more likely..

Fri, 09/02/2011 - 15:49 | 1627579 tmftdoyle
tmftdoyle's picture

having been duped by bernie, i still have clear memories of all the shenanigans, but unfortunately they are expo-facto. What the tracker, which was spun in summer 01 achieved was a monster of a 10k filing which made finding the smelly shit that the board member qouted referred to extremely difficult to find. for anyone interested in forensic accounting pull up the worldcom 2001 10k and go to the footnote concerning lease commitments, magically from year-end 00 to year end 01, lease commitments were reduced (if my memory is correct) by about $5 billion. yet there were no writedowns. when i read this footnote, admittedly after the company was outed, i puked. worldcom put its fraud into its public filings but just made it hard to find. BAC has not been that forthcoming to date.

Fri, 09/02/2011 - 20:48 | 1628621 Kayman
Kayman's picture

tmftdoyle

And if Bernie could have marked to pretend, he wouldn't be in jail today. What a fucking world we live in !

Fri, 09/02/2011 - 15:50 | 1627580 Misean
Misean's picture

Perhaps if they spin CFC into a SIV...or package up hunks of it into Super Senior, Senior and Investment Grade with AAA ratings on them as the risk is removed from the process...or something.

 

Fri, 09/02/2011 - 16:03 | 1627639 Greater Fool
Greater Fool's picture

You forgot the part where the structured bonds get sold to ME sovereign wealth funds and the Chinese government five minutes before the whole thing implodes and they lose their entire investment.

The American way!

Fri, 09/02/2011 - 22:47 | 1628814 cranky-old-geezer
cranky-old-geezer's picture

 

 

Or maybe something like ... re-re-mixes :)

(@ 6:30)

Fri, 09/02/2011 - 15:53 | 1627597 Gringo Viejo
Gringo Viejo's picture

Sign on a stock kiosk, London, during the South Sea's Bubble.

"A most marvelous and profitable undertaking, no one to know what it is."

From: "Extrodinary Popular Delusions And The Madness Of Crowds"

            by John Mackay, 1852

Fri, 09/02/2011 - 15:59 | 1627624 caerus
caerus's picture

i love that book

Fri, 09/02/2011 - 15:53 | 1627601 lolmao500
lolmao500's picture

Bail it out or tanks will be in the street and you'll be eating your own children for dinner because you'll be so poor!! Or so says the bank shills in Congress, the White House and the FED.

Fri, 09/02/2011 - 16:15 | 1627710 TuesdayBen
TuesdayBen's picture

...or will the children be dining on you...?

Fri, 09/02/2011 - 15:54 | 1627606 kengland
kengland's picture

"...than a WorldCom director likened to, well, horseshit."

Spoken like a cityboy...I sell horseshit for $40 a yard. That's $40 more than the BAC's equity is worth. Watch yourself

Fri, 09/02/2011 - 15:57 | 1627622 tekhneek
tekhneek's picture

I could use some actually. My organic matter's pretty low right now. Fall season's comin' up and I might actually get some rain in my garden in TX sometime this year. But that's just wishful thinking.

Fri, 09/02/2011 - 16:19 | 1627716 hedgeless_horseman
hedgeless_horseman's picture

Easy enough to find, if you're willing to shovel it.

Fri, 09/02/2011 - 16:59 | 1627910 Falcon15
Falcon15's picture

Rain in Texas? What is rain? I live in TX too, and it is hotter than the hinges of the Gates of Hell and three steps closer. Need some horseshit? Shovel up what Perry has been spreading. Ron Paul 2o12!

Fri, 09/02/2011 - 20:05 | 1628548 DCFusor
DCFusor's picture

Shhh.  Don't tell my dumbass hobby horse farming neighbors that "it's really good shit, Ms Preske".  I'll have to pay then.

Fri, 09/02/2011 - 20:54 | 1628626 Kayman
Kayman's picture

kengland

And if you charged for the cost of feeding and maintaining a horse, the price would be $400/ yard.

The only thing more expensive that a horse is a ......  (sorry- my wife might read this.)

Fri, 09/02/2011 - 15:55 | 1627610 John McCloy
John McCloy's picture

And cue.....the stock dilution death rattle.Because they do not need capital.

Fri, 09/02/2011 - 15:56 | 1627614 Piranhanoia
Piranhanoia's picture

They can't go broke yet,  They have furniture I am selling to get my money back at a foreclosure sale on their local branch.  POS is rat infested crap that looked bad when it was designed in burnt orange and avocado modern.  Am going to keep the safe because it was emptied anyway.

Fri, 09/02/2011 - 15:59 | 1627626 Josh Randall
Josh Randall's picture

I remember the Sprint - WorldCom buy-out talks back in the day, the whole town of KC thought they were going to have to find work elsewhere, not to mention alll the suits that would have had to relocate to scenic Jackson, MS.

SNIFFFF, Awwwwe I can still smell the panic in the air...

Fri, 09/02/2011 - 16:01 | 1627631 Fur Trader
Fur Trader's picture

"....existing equity value will drop to about $0.00... or $0.01 tops."

I own BAC Oct Puts.... paid $0.01 yesterday... do I win??

/sarc, but true and with apologies.

Fri, 09/02/2011 - 16:02 | 1627635 buzzsaw99
buzzsaw99's picture

Somewhere, out on the Pacific, a very tan man is opening a bottle of champagne that was paid for by someone else's grandmother.

Fri, 09/02/2011 - 16:13 | 1627704 caerus
caerus's picture

lol

Fri, 09/02/2011 - 16:02 | 1627637 Caviar Emptor
Caviar Emptor's picture

It's always been about BAC. THe March 09 stock market meltup was done so that BAC could recapitalize by doing a secondary. QE and repealing MTM was in large part so they could hide their disasters. They are an ex-bank. They have gone to meet their maker. They have rung down the curtain and joined the choir invisible. 

Fri, 09/02/2011 - 16:04 | 1627644 bania
bania's picture

Bath of America

Fri, 09/02/2011 - 16:10 | 1627675 Spitzer
Spitzer's picture

haha, I still like Ban of Cramerica

Fri, 09/02/2011 - 16:05 | 1627652 Shirley Wilfahrt
Shirley Wilfahrt's picture

Happy Friday Mother Fuckers!

http://www.youtube.com/watch?v=rmVQXIfzuIM

Fri, 09/02/2011 - 16:07 | 1627659 Schwetty Shorts
Schwetty Shorts's picture

Working at WorldCom, yeah those were the good old days... took a real nice haircut on my 401K (as in total loss).  I remember WC's decision to take coffee and water away as a "cost-cutting move."  That was Epic... as Bernie and Mr. Sullivan continued to live large right up until the very end.

Ironically, the case for a bailout could have actually been made, considering how many defense and govt networks were connected by way of the global MCI backbone.  I guess we still had some semblance of capitalism in those days - That or they just weren't greasing the right skids in Congress.

Fri, 09/02/2011 - 16:07 | 1627660 Everybodys All ...
Everybodys All American's picture

Buffet gets a free toaster with BAC purchase. Shocking.

Fri, 09/02/2011 - 16:07 | 1627661 Rastamann
Rastamann's picture

has Jim Cramer started recommending a BUY on any banking stocks yet?

if so, let me know....that's the ultimate signal to start buying put options all i am worth.

Fri, 09/02/2011 - 16:19 | 1627728 Cleg1
Cleg1's picture

The primary difference between WorldCom then & B of A today is that the "cat is outa the bag".

B of A won't take two years to unravel, its already started. One peak under their skirt tells the story, " they don't have a leg to stand on", not even a "stool". Buffet is a prop to lean on while he "shorts 'em" dry.

Nothing there but the foul smelling air of Merrill Lynch & Countrywide shenanigans. Trying to put a polish on those two turds will do that to you when you're already "all in" putting a polish on your own unsecured consumer & rapidly depreciating colateral turds.

Split up, bailed out, failed - regardless,  this Zombie is going to the Hallowean dance dressed as Lehman Bros.      

Fri, 09/02/2011 - 16:23 | 1627747 YesWeKahn
YesWeKahn's picture

Wait, are you saying that Buffet loves houseshit?

Fri, 09/02/2011 - 16:33 | 1627791 buzzsaw99
buzzsaw99's picture

brown horseshit loves bac

Fri, 09/02/2011 - 16:24 | 1627750 long-shorty
long-shorty's picture

I'll cover at $0.01.

Fri, 09/02/2011 - 16:38 | 1627820 jmc8888
jmc8888's picture

#1 Borghardt? Talk about an oxymoron.  MBA bullshit-speak.   The dumbest smart guys in the room.

#2 (pun intended) Poop in a closet? Reminds me of this

http://www.poopreport.com/BMnewswire/133.html

#3 Bank of America is fucked

 

Glass-Steagall

Fri, 09/02/2011 - 16:59 | 1627912 Seasmoke
Seasmoke's picture

wow it looks like Merrill Lynch is the dirtiest of the lowlifes......clawback John Thain and Stanley ONeill

Fri, 09/02/2011 - 17:00 | 1627916 ebworthen
ebworthen's picture

It would be great to see Warren Buffet suffocated by a huge pile of steaming horseshit.

He'll probably walk away with the roses since he has the politicians and judges in his pocket, but I would love to see him eat his $5 Billion.

BAC = WaMu Redux

Fri, 09/02/2011 - 17:32 | 1628095 Let them eat iPads
Let them eat iPads's picture

FAZ, bitchez!

Fri, 09/02/2011 - 17:35 | 1628105 Downtoolong
Downtoolong's picture

Speaking of taking baths (including BAC’s dismal performance post Buffett’s whitewash deal), I have a feeling the rest of the management at Berkshire Hathaway is never going to let Uncle Warren take a real bath alone in his own private tub again. I recommend against anyone making financial decisions while in the tub. Fantasies arise there all too often.

Fri, 09/02/2011 - 19:11 | 1628413 tony bonn
tony bonn's picture

let's dig deeper for analogies - enron and the putrid bush scandals associated it with are most a propos....bush = enron = bin laden = worldcom = 9/11....9/11 is a metaphor for the financial hydrogen bomb ready to go off and i for one want a front row seat - it is past time to incinerate the crap and the bankster-military-industrial-complex associated with it.....i almost puked when i saw rumsfeld on c-span2 today.....

Fri, 09/02/2011 - 20:09 | 1628559 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

9-11 occured because Bill Clinton failed to protect NY City after the first attack on the WTC during his watch.

9-11 is fully and totally the fault of Bill Clinton. period.

Clinton was in charge when the WTC was attacked the first time. The second attack was planned and the terrorists were training in America for over one year while he was POTUS. Had he at least put up some kind of fight do you think those terrorists would have even tried? Bill Clintons failure to protect America is why 9-11 happened.

 

Sun, 09/04/2011 - 11:06 | 1631316 Tunga
Tunga's picture

@ fxrxexexdxoxmx:Clinton played his part to be sure but to say he totally to blame means you are missing the big picture. Nuclear demolition was always incorporated into the plans of the WTC complex. Chertoff arranged for the FBI supplied bomb in 93 to be real instead of fake. John O'Neil discovered the link to the terrorists ran through Israel. All of the bodies in the WTC rubble were disintegrated except his. How come?

Fri, 09/02/2011 - 19:31 | 1628463 Big Ben
Big Ben's picture

If WorldCom = BAC, then Henry Blodget = who?

Fri, 09/02/2011 - 20:04 | 1628510 NuYawkFrankie
NuYawkFrankie's picture

Hmmmm.....   let me think......   Pope Gregory XXVI ?

Fri, 09/02/2011 - 20:10 | 1628561 Dr. Engali
Dr. Engali's picture

Henry Blodget = Dick Bove

Sun, 09/04/2011 - 10:51 | 1631291 peekcrackers
peekcrackers's picture

Buffet needs more planes and trains .   We will see some pimp out BAC jets for Buffets teem to smoke each others poles on.

Warren Buffet my knob!

Sun, 09/04/2011 - 10:52 | 1631292 peekcrackers
peekcrackers's picture

Buffet needs more planes and trains .   We will see some pimp out BAC jets for Buffets teem to smoke each others poles on.

Warren Buffet my knob!

Mon, 09/05/2011 - 08:33 | 1633781 shacai
shacai's picture

Welcome to http://www.replicabagsell.com .Our company was founded in 2004 and was committed to internet marketing businesses in 2006. Replica Handbags are always in a great demand and sells well. Recently, we launched some new and updated them on our website. Here you can find some scarce Cheap Christian Louboutin shoes, which were difficult to find from other websites. sac à main are also always in hotsale.

We have gotten many great comments from our customers and earn a good NFL jerseys reputation in foreign makerts, more than 90% customers are satisfied with our products and service, till now our online members NFL jerseys are beyond 80,000. As of right now, we currently serve customers from over Christian Louboutin 18 countries, and we are still growing. We really hope to expand our business through cooperation with individuals and companies from around the world.

Do NOT follow this link or you will be banned from the site!