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.

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chunga's picture

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

lizzy36's picture

something tells me you may get your wish.

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.

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....

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.

candyman's picture

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

wang's picture
wang (not verified) Sep 2, 2011 2:44 PM

Buffett invests in horseshit





nathandegraaf's picture

Quadruple A rated horseshit. 


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.



AldousHuxley's picture

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

Jasper M's picture

I'm taking  the under on that trade

Chuck Walla's picture

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

Captain Obviousness's picture

But only if it's too shitty to fail.

caerus's picture

this reeks of desperation (and horseshit)

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.

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...


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

caerus's picture

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

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.

Greater Fool's picture

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

tekhneek's picture

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

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?

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.

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.

eftian's picture

a little excrement more likely..

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.

Kayman's picture


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

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.


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!

cranky-old-geezer's picture



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

(@ 6:30)

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

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.

TuesdayBen's picture

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

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

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.

hedgeless_horseman's picture

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

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!

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.

Kayman's picture


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.)

John McCloy's picture

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

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.

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...

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.

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.

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. 

bania's picture

Bath of America