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Bank Of America Forces Depositors To Backstop Its $53 Trillion Derivative Book To Prevent A Few Clients From Departing The Bank

Tyler Durden's picture




 

Bank of America, which today reported a big bottom line loss net of one-time beneficial items, did something quite tricky and extremely devious last month: it shifted anywhere up to the total of $53 trillion of the total derivatives it held as of June 30 (as Zero Hedge previously reported) on its books at Q2 from the Holding Company, which was downgraded last by Moody's from A2 to Baa1 (the third-lowest investment grade rating) to its retail bank, which was downgraded to the far more palatable A2 (from Aa3). The reason for the transfer? Bank customers who were uneasy with the fact that suddenly the collateral backstoping the operating entity handling their counterparty risk was downgraded to just above junk, demanded that said counterparty risk be mitigated by the bank's $1 trillon in deposits. In other words, as Bloomberg first reported when it broke this story, anywhere up to the full $53 trillion (we don't know for sure how much so we assume the worst case) is now fully and effectively backstopped explicitly by the bank's $1,041 trillion (as of September 30) deposits. Pardon, we meant the people's deposits: the same deposits which caused the bank's website to be inoperative for several days in a row after it was rumored that there was an electronic run on the bank. Why? Just so Bank of America can appears whatever remaining clients it has so they decide not to take their business to another derivative counterparty. And who is exposed to this latest idiocy? Why you. But that's not all: the FDIC, which is the entity backstopping the deposits in a worst-case scenario, is not happy with this move for obvious reasons. Yet even it is hopeless to override the Fed, which as Bloomberg reports, "has signaled that it favors moving the derivatives to give relief to the bank holding company." And so, once again, we see just how much more important to the Federal Reserve are interests of US taxpayers and savers, over those of the banks that effectively run the Fed.

Bloomberg reports:

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.

 

Jerry Dubrowski, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment on the transfers or the firm’s discussions with regulators. The company “continues to accommodate the needs of our clients through each of our multiple trading entities, including Bank of America NA,” he said in an e-mailed statement, referring to the company’s deposit-taking unit.

 

Barbara Hagenbaugh, a Fed spokeswoman, said she couldn’t discuss supervision of specific institutions. Greg Hernandez, an FDIC spokesman, declined to comment.

The catalyst: the Moody's downgrade of the bank to a rating far more indicative of BAC's insolvent (aka D) status:

Moody’s Investors Service downgraded Bank of America’s long-term credit ratings Sept. 21, cutting both the holding company and the retail bank two notches apiece. The holding company fell to Baa1, the third-lowest investment-grade rank, from A2, while the retail bank declined to A2 from Aa3.

 

The Moody’s downgrade spurred some of Merrill’s partners to ask that contracts be moved to the retail unit, which has a higher credit rating, according to people familiar with the transactions. Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody’s decision, said a person familiar with the matter.

"All perfectly normal"

The moves by Bank of America are part of “the normal course of dealings that we’ve had with counterparties since Merrill Lynch and BofA came together,” Thompson said today.

Moving derivatives contracts between units of a bank holding company is limited under Section 23A of the Federal Reserve Act, which is designed to prevent a lender’s affiliates from benefiting from its federal subsidy and to protect the bank from excessive risk originating at the non-bank affiliate, said Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill School of Law.

With the Fed's blessing:

Moving derivatives contracts between units of a bank holding company is limited under Section 23A of the Federal Reserve Act, which is designed to prevent a lender’s affiliates from benefiting from its federal subsidy and to protect the bank from excessive risk originating at the non-bank affiliate, said Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill School of Law.

 

In 2009, the Fed granted Section 23A exemptions to the banking arms of Ally Financial Inc., HSBC Holdings Plc, Fifth Third Bancorp, ING Groep NV, General Electric Co., Northern Trust Corp., CIT Group Inc., Morgan Stanley and Goldman Sachs Group Inc., among others, according to letters posted on the Fed’s website.

 

The central bank terminated exemptions last year for retail-banking units of JPMorgan, Citigroup, Barclays Plc, Royal Bank of Scotland Plc and Deutsche Bank AG. The Fed also ended an exemption for Bank of America in March 2010 and in September of that year approved a new one.

 

Section 23A “is among the most important tools that U.S. bank regulators have to protect the safety and soundness of U.S. banks,” Scott Alvarez, the Fed’s general counsel, told Congress in March 2008.

In other words, while previously there had been a firewall between the bank's depository entity and the one that gambles, on either a flow or prop basis, with the abovementioned multi-trillion number, that firewall is now gone and all the money has been comminlged, explaining the FDIC's fear. And of course, in order to thank depositors for being explicit guarantors of the bank's derivative business, it is now forcing them to pay a $5/month fee.

Somehow we really doubt the 12/31 update will show a "total deposits" number over $1 trillion. Or anywhere remotely close.

Laslty, nobody should make the mistake that BofA is alone in this move: every other bank that has major derivative exposure and has a depository base has certainly been forced to do precisely the same by its bigger accounts, who have no desire of being exposed to surging counterparty risk and would much rather split it with America's depositors.

 

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Tue, 10/18/2011 - 15:09 | 1786206 wang (not verified)
wang's picture
#BoycottBankofAmerica
Tue, 10/18/2011 - 15:11 | 1786231 nope-1004
nope-1004's picture

Take your deposits out, move them to a credit union.  Problem solved.  Risk abated.

Good bye BAC.

LOL.

 

Tue, 10/18/2011 - 15:15 | 1786247 tarsubil
tarsubil's picture

When my wife closed her account yesterday they specifically asked if she was moving to a credit union. Where do they get off? She said none of your business. I would've been a little less diplomatic.

Tue, 10/18/2011 - 15:24 | 1786305 JohnG
JohnG's picture

Had a new will notarized last Sat. at my credit union.  I asked the guy if they are getting a lot of new account customers from megabank former customers -- he told me over 10K in the last 90 days - and this is a fairly small (12 branches I think) CU.

Tue, 10/18/2011 - 15:55 | 1786340 Pladizow
Pladizow's picture

There was a guy on CNBC yesterday who was the head of the Credit Union Association and he said new accounts were up 5 fold!

Employee Notice

Due to the current financial situation caused by the slowdown in the economy, Congress has decided to implement a scheme to put workers of 50 years of age and above on early, mandatory retirement, thus creating jobs and reducing unemployment.

This scheme will be known as RAPE (Retire Aged People Early).

Persons selected to be RAPED can apply to Congress to be considered for the SHAFT program (Special Help After Forced Termination).

Persons who have been RAPED and SHAFTED will be reviewed under the SCREW program (System Covering Retired-Early Workers).

A person may be RAPED once, SHAFTED twice and SCREWED as many times as Congress deems appropriate.

Persons who have been RAPED could get AIDS (Additional Income for Dependents & Spouse) or HERPES (Half Earnings for Retired Personnel Early Severance).

Obviously persons who have AIDS or HERPES will not be SHAFTED or SCREWED any further by Congress.

Persons who are not RAPED and are staying on will receive as much SHIT (Special High Intensity Training) as possible. Congress has always prided themselves on the amount of SHIT they give our citizens.

Should you feel that you do not receive enough SHIT, please bring this to the attention of your Congressman, who has been trained to give you all the SHIT you can handle.

Sincerely, 

The Committee for Economic Value of Individual Lives (E.V.I.L.)


PS - Due to recent budget cuts and the rising cost of electricity, gas and oil, as well as current market conditions, the Light at the End of the Tunnel has been turned off.

Tue, 10/18/2011 - 16:48 | 1786768 Totin
Totin's picture

Lulz. I'm stealing that man!

Tue, 10/18/2011 - 19:35 | 1787273 max2205
max2205's picture

Having the FDIC backstop derivatives is like asking a homeless person to pay your mortgage every month. Ain't gonna happen.

FDIC isn't really an agency. It's like a ghost agency.

Tue, 10/18/2011 - 20:27 | 1787370 seek
seek's picture

This is quite true, since it's basically a communal insurance fund that was already so depleted that they had the banks pay their fees years in advance back in 2008/09.

That this happened, though, is telling. It really makes the trigger event/black swan possibilities to take out the entire banking system obvious. And banks being the scum they are, I could see them trying to get the full notional value of the derivatives. At this point you'd have to print to cover, and boom, there's the hyperinflationary event that takes place to "save" the banks while reducing the customer's savings value to nearly zero.

Tue, 10/18/2011 - 21:44 | 1787493 Harlequin001
Harlequin001's picture

Reading this I almost thought to myself, why don't I go and open an account with a credit union?

And then I remembered, it's because it's stored in gold in a vault in Switzerland.

and then I thought WTF!

and yes, seek, the money printing, for which a Credit Union is fuck all protection will begin in earnest when the US can no longer access bond markets due to high rates. It must then pay for everything in cash, and not 2% per year with bonds.

That means that is the yield on a 5 year is 2%pa, then the governments requirement for physical cash goes up by a multiple of 50, instantly, and that's just to stand still.

Good luck with your credit union when that happens...

Tue, 10/18/2011 - 23:53 | 1787826 lunaticfringe
lunaticfringe's picture

I was lost, first and almost at the beginning I think.

Wed, 10/19/2011 - 01:08 | 1787952 flacon
flacon's picture

As long as FDIC has the word "Corporation" in it, it's all good. Corporations never loose and they can always be trusted because they are back-stopped by the Federal Government who has Deposits into such Corporation. In Government We Trust. 

Wed, 10/19/2011 - 00:40 | 1787903 gitano513
gitano513's picture

Halequin!  Give us a link or two where some of us can do the same.  Reputable places though!  

Wed, 10/19/2011 - 01:11 | 1787955 flacon
flacon's picture

goldmoney.com

I have some in Switzerland, UK, and Hong Kong. Buy sell, hold cash, swap etc. James Turk is rated AAAAAA+

 

Wed, 10/19/2011 - 01:33 | 1787988 gitano513
gitano513's picture

Thank you, Flacon.  

Wed, 10/19/2011 - 06:13 | 1788106 Harlequin001
Harlequin001's picture

gitano I'm sorry old stick, I have nowhere I would 'choose' to recommend to you. It took me a long while to find a place and circumstances I was happy with, which is not what I would wish to disclose on these pages.

As with everything, due diligence is what matters, ultimately. Reputable is not necessarily well known or well marketed, reputable is the detail in the contracts that allow you to see the contracting parties, to see the valuations methodology, to work out how you can lose your money and protect against it and how to ensure you maintain access to your assets.

If I can give you any advice it would be to plan carefully for income and capital gains taxes first, because that is the ultimate way that all gold investors will lose their money. That kind of information is usually very well kept and not for public viewing because as everyone knows, even if it worked, the tax office would do all tha they could to undermine it anyway. DD is everything...

Keeping your gold safe is a different matter.

If you wish I can set up an email and we can discuss it further...

Tue, 10/18/2011 - 21:08 | 1787445 Withdrawn Sanction
Withdrawn Sanction's picture

FDIC...you ought to see their HQ building up close.  What an architectural pile of crap.  It's a perfect metaphor for their "mission."  It's mostly a glass curtain/steel skeleton (not too different from your garden variety office park). But then they covered the upper floors w/cheap-looking pink granite appliqués on the exterior.  From a distance, it looks big, solid, and imposing.  On closer inspection, however, the street level walls don't even have the cheap-looking applied granite.  It's just pink-painted concrete (and not even painted faux to mimic granite).  Just a cheap, slap-dash fraud facade...exactly like the FDIC itself.

Speaks volumes w/o saying a word.

Tue, 10/18/2011 - 17:40 | 1786986 Leopold B. Scotch
Leopold B. Scotch's picture

Brilliant!

Wed, 10/19/2011 - 00:28 | 1787879 gitano513
gitano513's picture

The best thing for everyone to do is to take all their money OUT of the banks, especially the big banks.  

Something bad is coming, just like in 2008, and it has everyone spooked.  At least credit unions faired better than the banks and they are insured.  The big banks are going to collapse and implode into themselves and they will try to take down everyone in the process.  

They are fearmongering everyone as much as they can also so that people don't close their accounts. They are also downplaying the fact that they have all their clients closing their accounts.  

Chase is scared as hell too.  They changed around their JP Morgan Chase web site to show that they "care" about the little people and about communities.  I think it's all bullshit because they had a big hand in the mortgage fraud and they will also go down as well.  

I hope everyone DO NOT fear the big banks or what they have to say.  I also pray to God that the US govt DOESN'T bail them out ever again.  

We have to let the big banks know that without us, the people, they are nothing!! 

 

Tue, 10/18/2011 - 15:27 | 1786318 greased up deaf guy
greased up deaf guy's picture

yahoo finance top story:

Bernanke: Crisis Taught Lesson for Central Banks

"Federal Reserve Chairman Ben Bernanke says a key lesson learned from the 2008 financial crisis is that central banks must have a dual goal of controlling inflation while supporting the banking system."

ahhh... the REAL dual mandate is now blatant.

http://finance.yahoo.com/news/Bernanke-Crisis-taught-lesson-apf-70589651.html?x=0&sec=topStories&pos=main&asset=&ccode=

Tue, 10/18/2011 - 19:41 | 1787286 Bastiat
Bastiat's picture

The truth is always refreshing.

Tue, 10/18/2011 - 15:30 | 1786341 sqz
sqz's picture

"... of course, in order to thank depositors for being explicit guarantors of the bank's derivative business, it is now forcing them to pay a $5/month fee." Ouch.

That simply wouldn't be legal in most developed countries outside the US. I'm somewhat surprised this bank has any deposits left ...

Tue, 10/18/2011 - 15:56 | 1786458 TheFourthStooge-ing
TheFourthStooge-ing's picture

That simply wouldn't be legal in most developed countries outside the US.

You need to remember that the US is shedding its "developed country" status. It is now what is referred to as a submerging economy.

 

Tue, 10/18/2011 - 17:09 | 1786856 mjk0259
mjk0259's picture

And rightfully so! This is a disgrace. There should be Congressional hearings right away.

Tue, 10/18/2011 - 17:52 | 1787038 Leopold B. Scotch
Leopold B. Scotch's picture

Yes. They've proven to be such wonderful overseers of the system.

Tue, 10/18/2011 - 21:47 | 1787513 Harlequin001
Harlequin001's picture

and a fat lot of use eh...

Tue, 10/18/2011 - 15:30 | 1786339 TheGameIsRigged
TheGameIsRigged's picture

WE NEED REVOLUTION - pure and simple.  TPTB just suck...there's really no other way to say it.  It disgusts me.  I do not know how they sleep at night.

Tue, 10/18/2011 - 15:36 | 1786366 JohnG
JohnG's picture

Vampires don't need sleep.  They sit up and plot new ways to rob "customers" aka vampire food.

Tue, 10/18/2011 - 15:52 | 1786439 Nascent_Variable
Nascent_Variable's picture

Guillotine time may not be here just yet, but take comfort in the fact that it is fast approaching.

Off with their heads.  All the lords and their squires - every last villainous, thieving one of them.

Tue, 10/18/2011 - 17:02 | 1786828 LFMayor
LFMayor's picture

How they sleep is not important.  Where they sleep, now that's useful.

Tue, 10/18/2011 - 17:12 | 1786874 Manthong
Manthong's picture

Long: Torches and Pitchforks

Short: Time

Wed, 10/19/2011 - 00:47 | 1787914 gitano513
gitano513's picture

If there ever is a real revolution, meaning much more than what is happening right now, it may just be the bloodiest one of all.  These capitalist pigs will never let go of what they have stolen.  I have seen a few videos where some 'rich' people have spoken about how they have food storage closets in their homes and they have also bought guns.  They also spoke about learning how to shoot and how they have been turning their money into gold bullions and silver as well.  

As I watched the video, I just kept laughing to myself.  They were all laughing and giggling and shit, like if we are supposed to be scared of them!  Little do they know that they are prime targets when all hell really breaks loose.  We also outnumber how ever many bullets they think they have!!  lmao  

Tue, 10/18/2011 - 17:03 | 1786832 optimator
optimator's picture

I Enjoy being a customer of Bank america.  I've had their credit card for years.  I use it, for example, when the coffee shop doesn't have change for a fifty dollar bill. 

Tue, 10/18/2011 - 17:19 | 1786913 upWising
upWising's picture

 

Bedtime at the Moynihan house....

Moynihan kids:  "Daddy, tell us that story about how money gets made out of nothing."

Brian Moynihan: "Well, not so long ago, and not far enough away, there was a place called Countrywide. It was very rich and everybody in Countrywide had an easy lifestyle and a dark tan.  Well not everybody, mostly Uncle Angelo.  Then things started getting tough for Uncle Angelo and  he had to stuff his suitcases with money, and hop a quick plane to a small island."

kids: "Tell us more daddy!"

Brian Moynihan: "So the Kingdom of BofA had to HELP COuntrywide. The people of Countrywide were sad & most of them lost their jobs & their houses. But the Kingdom of BofA was very generous so it gave the Handsome Princes of Countrywide nice houses & good retirements.  BofA had friends in the Land of TARP who paid for all of this as a favour.  But then all the people who used to love the Kingdom of BofA and carry their cards around in their pockets, got sad & stopped being BofA's friend; they wanted their money back!"

kids:  "Oh NO! What Happened?"

Brian Moynihan: "BofA fixed all the problems with Magic Pixie Dust & Debit Fees & stacks of Green Paper & Computer Tricks and made them all go away.  Their Special Friends in the Land of Federal Reserve have lots of Pixie Dust & lots of Printing Presses & Green paper  and they can make all of BofA's problems go away.  At least so far. Now go to bed kids.  Daddy has a headache."

 

Tue, 10/18/2011 - 15:07 | 1786212 NumberNone
NumberNone's picture

Bob Piss-on-me just said BAC is trading below book value.  I'm sure he's done his homework on all of this before spouting off. 

Tue, 10/18/2011 - 15:31 | 1786344 DCFusor
DCFusor's picture

Waaaaaaay below if they're really got 1,041 trillion in deposits!  I assume that's a typo in the article.  But with FASB rules, book value is meaningless - no mark to market, no value can be determined from what they report.  Their true book is probably negative, so in reality they are trading way above their book value.

Tue, 10/18/2011 - 16:13 | 1786574 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Yeah, typo, 'cos if they had 1+ quadrillion in deposits, problem solved!

But unfortunately they have over 50x leverage between their derivatives exposure vs their deposits. Who needs anything scarier at Halloween? Hey kids, I'm B of A's balance sheet! Boo!

Tue, 10/18/2011 - 15:07 | 1786214 Comay Mierda
Tue, 10/18/2011 - 15:07 | 1786215 sabra1
sabra1's picture

did they at least pay the $5.00 for the transfer?

Tue, 10/18/2011 - 15:07 | 1786216 Debtless
Debtless's picture

2 words. Credit Union. 

Next question...

Tue, 10/18/2011 - 15:16 | 1786253 NotApplicable
NotApplicable's picture

While I've been a credit unioner all of my life, they are not immune from the financial plague either, thanks to the help of the U.S. Central Credit Union (i.e. the central bank for credit unions), who got them all involved in toxic paper "assets."

http://en.wikipedia.org/wiki/U.S._Central_Credit_Union

http://www.reuters.com/article/2009/03/22/us-financial-creditunion-inter...

Simply put, there is no avoiding the consequences of a crack-up boom. Any place that relies on the fiat standard for sustainability is doomed.

Tue, 10/18/2011 - 15:20 | 1786279 SilverIsKing
SilverIsKing's picture

Make sure your credit union doesn't keep it's deposits at BAC...lol

Tue, 10/18/2011 - 15:35 | 1786358 Kali
Kali's picture

This is so true.  Many of the credit unions are no better than banks.  Do your homework.  I pulled out of my CU after being there 16 years when they were urging members to invest in Goldman Sucks bonds at 5% to "make your money work better for you".  They still offer good customer service, lower fees.  I think it wise not to keep any "money" in an financial institution more than to clear checks for bills.  The shit is coming down and they all will steal every last penny left anywhere not under your direct control.  This is  not a "Wonderful Life"  PM's bitchez. 

Tyler- what is your take on the CFTC decision?

Tue, 10/18/2011 - 15:43 | 1786393 Rynak
Rynak's picture

That may be so in the US.... in europe however, exposure of credit unions to the TBTF shit tends to be low - not nonexistent, but low. For example, in the recent "do your own stresstest"-article, i moved all sliders to the max - 100% haircuts in the EZ, and so on.... and my local credit union was near the bottom of the failure list, with about 0,1B in the reds.

Tue, 10/18/2011 - 15:52 | 1786438 Kali
Kali's picture

Where do they deposit their funds?  Who are the credit union members (with loans outstanding?).  I laugh at my friends who "bank" with  a credit union that is comprised of all government employees.  What will happen to your credit union when TSHTF?  Will your members still have jobs and income?

Good for you, you did your due diligence.  I think.  What is your CU holding?  Gold?

Tue, 10/18/2011 - 16:27 | 1786507 Rynak
Rynak's picture

Where do they deposit their funds?

Mine does not deposit funds outside the cooperative.

Who are the credit union members (with loans outstanding?)

Don't know - we have a lot of cooperatives where i live, and thanks to the shitty megacorps in my "state" having killed off most of the competition, the cooperatives here have no problem surviving on their own, because people are switching to them en masse. So, i wouldn't know why they'd need gov assistance and have never heard of such a thing. Also, the gov here DOES already have it's own nationwide bank system, with which the cooperatives and corporations are competing.... so again, why should they?

Will your members still have jobs and income?

That's a good point but not really on topic - when the entire economy crashes, all bets are off anyways. However, it does not necessarily need to be that the worst of all worst cases happens - so when the outcome is just catastrophic, rather than doomsday, the undercapitalized ones will fall first, and the more autonomous ones later.... which should give oneself more than enough warning time.

Good for you, you did your due diligence.  I think.  What is your CU holding?  Gold?

(prev reply removed - i didn't correctly read your question and thought you were asking about my longterm holdings)

Okay, i just checked - apparently, it is almost completely cash - just aprox. 15% of the capital is invested in stocks and metals. So, it's major exposure is fiat - if the EUR hyperinflates, the bank goes down.

Tue, 10/18/2011 - 15:28 | 1786323 Libertarians fo...
Libertarians for Prosperity's picture

 

 

Where do most small banks and credit unions get funding?

Tue, 10/18/2011 - 15:32 | 1786347 fuu
fuu's picture

I find a word cloud of your last 10 posts to be rather funny.

http://imageshack.us/f/204/rnrlfprandomcomments.png/

 

Tue, 10/18/2011 - 16:31 | 1786652 nyse
nyse's picture

Hilar!

Tue, 10/18/2011 - 21:54 | 1787532 Harlequin001
Harlequin001's picture

Yep, some big words in there: car, metal, shiny, fuck...

Tue, 10/18/2011 - 15:07 | 1786217 Irish66
Irish66's picture

This is so bullish 12000 here we come

Tue, 10/18/2011 - 15:12 | 1786233 derek_vineyard
derek_vineyard's picture

new all time highs  16000 and beyond

Tue, 10/18/2011 - 15:13 | 1786235 Irish66
Irish66's picture

France and Germany agree on 2tr euro

Tue, 10/18/2011 - 15:13 | 1786219 X.inf.capt
X.inf.capt's picture

i dont think it'll help 'em

its becoming very vogue for the masses to go to a credit union...

or opt out by using a pay as you go debit card, m.o.'s and the old stand by....

CASH!

Tue, 10/18/2011 - 15:09 | 1786220 HelluvaEngineer
HelluvaEngineer's picture

What rumor / earnings just leaked? 10 pts on ES

Tue, 10/18/2011 - 15:18 | 1786269 IrritableBowels
IrritableBowels's picture

No rumors needed-it's three o'clock!

Tue, 10/18/2011 - 15:09 | 1786221 Comay Mierda
Comay Mierda's picture

next step: withdrawal restrictions and bank holidays bitchez

Tue, 10/18/2011 - 15:09 | 1786223 monopoly
monopoly's picture

And we ramp to the highs of the day. So glad I do not short this broken market.

Tue, 10/18/2011 - 15:23 | 1786287 1fortheroad
1fortheroad's picture

3:00 boner right on time, breakout the lube. LOL 4:00 my time.

 

Tue, 10/18/2011 - 15:28 | 1786324 HellBoy6
HellBoy6's picture

I bet this crap trades off in after hours.  None of this is real it can't be, can it?

Tue, 10/18/2011 - 16:11 | 1786568 earleflorida
earleflorida's picture

this market trades on a vapor trail at 2pm daily

wall street's,... hell's kitchen, seems  cooking the cookbook only makes sense to the head chef [whomever that be (chef ramsey's?)] whose steady diet, composes of two exotic ingredients  - one dash arsenic followed by a tasty sip of hemlock, and of course - followed by a good nights read of the financial pages - repeat daily til,... ? 

your killing me tyler - great digging

Tue, 10/18/2011 - 15:10 | 1786224 LawsofPhysics
LawsofPhysics's picture

Bank of America screwing their own clients.  Wow straight out of the GS playbook.

Tue, 10/18/2011 - 15:10 | 1786227 hungrydweller
hungrydweller's picture

I'm done with BoA.  Moving my fiatsco accounts to my local credit union ASAP.  I will also be keeping as much of my linen out of digital space as possible.

Tue, 10/18/2011 - 16:13 | 1786572 tekhneek
tekhneek's picture

Nov 5, 2011 -- Bank Transfer Day

Join us.

http://www.facebook.com/event.php?eid=281139538577206

Tue, 10/18/2011 - 15:11 | 1786229 Mister Ponzi
Mister Ponzi's picture

AIG 2.0 bitchez!

Tue, 10/18/2011 - 15:11 | 1786230 DonutBoy
DonutBoy's picture

Good thing that Volcker rule is in place to protect depository institutions.

Tue, 10/18/2011 - 15:24 | 1786304 Vergeltung
Vergeltung's picture

<snort!>

 

Tue, 10/18/2011 - 16:19 | 1786606 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

I, too, snorted and spit coffee all over my monitor. The only "deposits" the avg schmuck will be able to retrieve are those financial bukkake products covering them, as they are left behind by Blankfein et al.

Tue, 10/18/2011 - 15:12 | 1786234 NumberNone
NumberNone's picture

Perfect timing for a stick save...another 2trillion will save us!

http://www.guardian.co.uk/business/2011/oct/18/france-and-germany-move-towards-2tn-euro-fund 

Tue, 10/18/2011 - 15:13 | 1786236 monopoly
monopoly's picture

I am amazed that anyone here that has been around Zero Hedge for more than 4 days still banks with any of the parasite banks that rob, steal and lie to their depositors. Beyond words for me.

Credit Unions, small solvent banks in our community. No excuse except being lazy.

Tue, 10/18/2011 - 15:13 | 1786237 tarsubil
tarsubil's picture

My wife finally went in to close the zombie account yesterday. We had drawn down the balance to about 100 bernank bucks and they still took her into a room and grilled her on why she was closing. They lied and said everyone had debit card fees and debit fees. My wife brought up the fact that direct deposit was available now a full 2-3 days before BoA handled it. The lady just had no answer. Reminds me of the AOL cancellation process. BoA is going to blow up. The place is in full melt down and the emergency pumps are broken.

Tue, 10/18/2011 - 15:13 | 1786238 LawsofPhysics
LawsofPhysics's picture

What the fuck, eveything just went green.

Tue, 10/18/2011 - 15:16 | 1786254 kk1532003
kk1532003's picture

3:00 PM EST.  You can set your watch by it...

Tue, 10/18/2011 - 15:52 | 1786301 Manthong
Manthong's picture

Maybe the hyperinflation sets into the market first..  worthless dollars inflating overvalued stocks.

Maybe the market will never go down again.

 

Tue, 10/18/2011 - 15:17 | 1786264 Comay Mierda
Comay Mierda's picture

SPX just broke 1220, next up 1250

Tue, 10/18/2011 - 15:19 | 1786277 kk1532003
kk1532003's picture

3:00 PM EST.  You can set your watch by it...

Tue, 10/18/2011 - 15:14 | 1786239 ex VRWC
ex VRWC's picture

Here we have a TBTF bank at odds with the FDIC.  Although it would be a good move politically for the Obama administration to pressure the FDIC to force the issue and confront the TBTFs, my money says they won't.  They will therefore provide just another proof of their complicity with the bankers.  We will see.

Tue, 10/18/2011 - 17:27 | 1786934 Paul Bogdanich
Paul Bogdanich's picture

The Obama administration confront a banker?  During an election funding cycle?  What planet are you on Holmes?   

Tue, 10/18/2011 - 15:14 | 1786243 monopoly
monopoly's picture

And look at our miners. Gotta keep the faith. Not easy sometimes. But never, never do margin with gold....

Tue, 10/18/2011 - 15:15 | 1786248 Hansel
Hansel's picture

Calvinball Rule 1.5: The Calvinball Field should consist of areas, or zones, which are governed by a set of rules declared by players. Zones may appear and disappear as often and wherever the player decides. For example, a corollary zone would enable a player to make a corollary (sub-rule) to any rule already made. Or an opposite zone would enable a player to declare reverse playibility on the others. (Remember, the player would declare this zone oppositely by not declaring it.)

Tue, 10/18/2011 - 15:16 | 1786249 Temporalist
Temporalist's picture

Yay $2 Trillion for EFSF

Tue, 10/18/2011 - 16:15 | 1786589 tekhneek
tekhneek's picture

That's definitely not inflationary.

Tue, 10/18/2011 - 15:16 | 1786251 Ponziconomy
Ponziconomy's picture

When BAC, GS, UBS and MS all merge, we'll have the ultimate in acronyms: SSCUM BBAGS.

Tue, 10/18/2011 - 15:18 | 1786276 Denver768
Denver768's picture

Love it Ponzi....  Truth.   

Tue, 10/18/2011 - 15:48 | 1786424 Pladizow
Pladizow's picture

Better yet, full of BS SCUM BAGS!

Tue, 10/18/2011 - 15:16 | 1786252 kito
kito's picture

NOVEMBER 5TH IS BANK TRANSFER DAY. SPREAD THE WORD. GO LOCAL!!!

Tue, 10/18/2011 - 15:51 | 1786436 iDealMeat
iDealMeat's picture

On or Before the 5th..  He who transfers (panics) first. transfers (panics) best..

 

Tue, 10/18/2011 - 16:16 | 1786595 tekhneek
tekhneek's picture


Nov 5, 2011 -- Bank Transfer Day

Join us.

http://www.facebook.com/event.php?eid=281139538577206

Tue, 10/18/2011 - 17:40 | 1786984 Calculated_Risk
Calculated_Risk's picture

it's broken...

Tue, 10/18/2011 - 23:19 | 1787739 unununium
unununium's picture

CR?  "No systemic risk in MERS"?  Is that you?

Tue, 10/18/2011 - 15:16 | 1786257 Denver768
Denver768's picture

This sh!t is JUST CRAZY.....  I can't understand in anyone's right mind, how this completely unethical bunch of people sleep at night, knowing that they are willingingly, purposefully destroying whatever last shred of financial stability for millions and millions of Americans.

To the GOV'T and FED..... TIME TO UNWIND THIS DERIVATIVE SHIT NOW.  Let's get it over with and start over.  ....AND Make the people whole, not the crooks and manipulators.

Tue, 10/18/2011 - 16:02 | 1786490 Deadpool
Deadpool's picture

dare to dream.

Tue, 10/18/2011 - 15:16 | 1786258 monopoly
monopoly's picture

BofA...."the emergency pumps are broken". That is perfect. Well done Sir.

Tue, 10/18/2011 - 15:16 | 1786260 Little John
Little John's picture

By God this is just wrong.  

 “You say you want a revolution…” Well count me in.

Tue, 10/18/2011 - 15:17 | 1786261 The Axe
The Axe's picture

Everything is solving   according to DJ......sorry   no market crash...lol

Tue, 10/18/2011 - 15:17 | 1786265 squeal
squeal's picture

Unbelievable.

The stock is skyrocketing.

The crash will have to wait until the bank run.....

Move that money, bitches!

Tue, 10/18/2011 - 15:17 | 1786266 Johnny Yuma
Johnny Yuma's picture

You just have to think something big is right around the corner for BAC. Maybe a spin off of the IB and the deposit side sold/guaranteed by the Fed for the buying entity. 2008 all over again...

Tue, 10/18/2011 - 15:45 | 1786407 Buzz Fuzzel
Buzz Fuzzel's picture

You don't get it do you.  This is an example of why we have invented Too Big To Fail.  Any government involvement in this is futile at this point.  The only weapon they have is lies and deception hoping people continue to think they, the Govt, is somehow omnipotent.  Human civilization is not TOO BIG TO FAIL.

Tue, 10/18/2011 - 18:34 | 1787155 Poor Grogman
Poor Grogman's picture

 

 

The Sheeple forget that "The Government" is not a income generating, or wealth creating business.

 

The only thing the Government has backing it is its ability to raise taxes ON US!

 

Ask the Greeks how that is working out.

 

The Government is guaranteeing our money with... (drum roll)....our money.

 

What a scam ....Too Funny.

 

 

 

 

 

 

Tue, 10/18/2011 - 21:39 | 1787495 Johnny Yuma
Johnny Yuma's picture

Oh I get it 100% and you're right, they are/were too big to fail until now. They know it and this is why BAC is using it's depositors as hostages. There's no way a standard bail out would be acceptable at this point so they figure they'll just straight up rob us now. 

Tue, 10/18/2011 - 15:17 | 1786267 Rob Jones
Rob Jones's picture

Put BAC out of business! Move your deposits to a S&L. And don't keep any more money than absolutely necessary in an account earning 0.01%. Withdraw it and put it an a safe-deposit box.

Tue, 10/18/2011 - 15:18 | 1786271 The Axe
The Axe's picture

PS;   gold rally on this information is why I should have become a blacksmith.

Tue, 10/18/2011 - 15:18 | 1786275 karzai_luver
karzai_luver's picture

I would like someone to ask for their views on this at the next Pug debate and report back as I will not bother viewing.

 

No need to ask the TOTUS as he is clueless anyway.

 

Tue, 10/18/2011 - 15:20 | 1786283 Bansters-in-my-...
Bansters-in-my- feces's picture

THE usa NEEDS A JUSTICE DEPARTMENT.

Tue, 10/18/2011 - 15:51 | 1786433 Pladizow
Pladizow's picture

They do, The "Criminal" Justice System, i.e., justice for the criminals!

Tue, 10/18/2011 - 15:22 | 1786293 Belarus
Belarus's picture

You leave the market for a couple minutes and the only thing that happens is bears get stampeded again. WOW!!!!!

Tue, 10/18/2011 - 15:22 | 1786295 Timmay
Timmay's picture

How is $53 T in bets backed by $1 T in actual $$ still rated Aa3?

Tue, 10/18/2011 - 15:37 | 1786372 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"Tradition"!

Tue, 10/18/2011 - 15:25 | 1786312 Bansters-in-my-...
Bansters-in-my- feces's picture

mY ,mY....

What status General Electric seems to have.

Contacts,not contracts,perhaps.?

Tue, 10/18/2011 - 15:27 | 1786319 Kokulakai
Kokulakai's picture

This signals the looting of insured deposits. 

Tue, 10/18/2011 - 16:07 | 1786543 azusgm
azusgm's picture

It is unpatriotic to have money on deposit at BAC. Give the FDIC some relief and pull your $$$$$$$.

Tue, 10/18/2011 - 15:28 | 1786322 Deadpool
Deadpool's picture

53,000,000,000,000. Makes Greece look like an olive oil splot.

Tue, 10/18/2011 - 15:28 | 1786326 Cone of Uncertainty
Cone of Uncertainty's picture

Hey Bernanke, how bout I commingle my fist with your grill?

Tue, 10/18/2011 - 15:30 | 1786335 Lord Welligton
Lord Welligton's picture

As many have already said or alluded to.

Surely if the general public get to understand this little bit of bookkeeping they will withdraw they deposits.

And those who have significant deposits and internet banking won't be bothering with a visit to a branch.

Most odd.

It's as if they are asking for a bank run.

Tue, 10/18/2011 - 15:58 | 1786461 Kali
Kali's picture

So everyone goes to cash?  Then they revalue or introduce new currency?  FTW!

Tue, 10/18/2011 - 15:30 | 1786342 Sgt. Oddball
Sgt. Oddball's picture

I used to play at Full Tilt Poker who just got charged by the Justice Department for running a ponzi scheme for using players funds to pay themselves bonuses instead of keeping their deposits segregated and protected in the event of cash flow problems.  They went under and I'm still waiting to get my money back.  Somehow I think this whole mess is going to unwind itself in the same way because the FDIC does not have the capital to cover just the exposure from BAC deposits alone.  Only difference is the criminals running the BAC ponzi get bailouts and bonuses instead of facing criminal charges.

Tue, 10/18/2011 - 17:11 | 1786870 mjk0259
mjk0259's picture

Doesn't matter, the Fed will come up with some kind of bailout program and print money. The cost will be distributed to everyone via inflation.

Tue, 10/18/2011 - 15:33 | 1786350 Dick Darlington
Dick Darlington's picture

I would say that NOW is the time to take your money out from the "banks", convert it to something REAL and run.

Tue, 10/18/2011 - 15:42 | 1786390 Magnix
Magnix's picture

convert them into gold/silver - thats what I did. F*ck banks!

Tue, 10/18/2011 - 15:35 | 1786360 PulauHantu29
PulauHantu29's picture

All in a day's work......

"Why steal less when you can steal more?"

Tue, 10/18/2011 - 15:37 | 1786369 Buzz Fuzzel
Buzz Fuzzel's picture

What would $1 Trillion in sudden FDIC liabilities do to the 2012 federal deficit?  I am doubtful The Berneke and Timmy working together could jam another trillion in debt  into the system without a few ramifications. 

Tue, 10/18/2011 - 15:41 | 1786374 TheAkashicRecord
TheAkashicRecord's picture

Gramm–Leach–Bliley Act, isn't that what enables this?

Take your money out if you don't want to be implicated in propping up the Ponzi.

Tue, 10/18/2011 - 15:38 | 1786375 PartysOver
PartysOver's picture

Cloward Pivens living large at 1600 Pennsylvania and 20th Street and Constitution Avenue, N.W.

 

Have a nice day, citizen.

Tue, 10/18/2011 - 18:59 | 1787202 ClassicalLib17
ClassicalLib17's picture

I am a sovereign, not a citizen.  Albeit, a poor sovereign.  Carry on!

Tue, 10/18/2011 - 15:39 | 1786380 Cone of Uncertainty
Cone of Uncertainty's picture

I just called my local BOA, and inquired about opening an account.

The lady asked my name and I said BSD.

"BSD?"

Yes, my name is BSD and I would like to deposit $50 trillion.

"Sure, we are backed by Bernanke and the FDIC, we can handle that."

Great!

"For such a big deposit you get an extra large tub of vaseline sir, thanks and welcome to BOA."

Awesome!

Tue, 10/18/2011 - 15:41 | 1786387 Magnix
Magnix's picture

If BOA crashes, what am I going to do with my mortgage with BOA? Just wondering...

Tue, 10/18/2011 - 15:54 | 1786444 Problem Is
Problem Is's picture

BofA is probably only servicing your mortgage...

Who owns the promissory note??
Only MERS knows for sure... They hold 60 million mortgages on American homes...

Tue, 10/18/2011 - 17:13 | 1786877 mjk0259
mjk0259's picture

Probably owned by taxpayers thru FNMA, bought at 2x market value by US taxpayers.

Tue, 10/18/2011 - 15:47 | 1786399 PulauHantu29
PulauHantu29's picture

It's only money.

 

Tue, 10/18/2011 - 16:32 | 1786657 XitSam
XitSam's picture

It's only fiat. Gold is money.

Tue, 10/18/2011 - 15:45 | 1786409 WaltzTangoFoxtrot
WaltzTangoFoxtrot's picture

Your sentance - 

 

And so, once again, we see just how much more important the Federal Reserve are the interest of US taxpayers and savers over those of the banks that effectively run the Fed.

The Fed is literally owned by the banks, and therefore has no duty to the taxpayers.  Its only conneciton to the political universe is that the Chariman of the Federal Reserve is appointed by the President, and confirmed by the US Senate.  Further, the periodic "reports" to the US House and Senate are mandated.  

This, however does not mean the Fed Chair has to tell the truth when testifying!

 

WTF

Tue, 10/18/2011 - 15:46 | 1786413 Big Ben
Big Ben's picture

Off balance sheet obligations, bitchez!

In what crazy, alternate dimension of the Twilight Zone are banks allowed to underwrite and purchase derivatives? Welcome to the USA!

Tue, 10/18/2011 - 15:47 | 1786421 Problem Is
Problem Is's picture

Hey Obama Bin Lyin': We See the Back Door Wall Street Bailout
Unlike 2008... you can't go to Congress with TARP to deliver cash flow to Wall Street for its massive derivatives losses...

Obummer's Economic Plan: No Bankster Left Behind: Operation "Bailout My Bonus!"
So this time you think the Amerikan public is too stupid to see this is a back door Wall Street Derivatives bailout/ back stop...

CREEP: Committee to RE-Elect the President
So the idiot Barry Soetoro and CREEP headed by Ass-Hole Axelrod think they can back door bailout Wall Street and waltz along to re-election thinking no one will notice...

You will be run out of town on a voting rail you bitch, Bullshit Barry...

Tue, 10/18/2011 - 15:48 | 1786428 gabeh73
gabeh73's picture

I handed my form in to HR yesterday...no more direct deposits at BOA from me. From now on they are going to my credit union account.

 

On another note...NGDP targeting is the hottest new meme meant to keep the central bankers in power. Catch up on the fad:

http://www.businessinsider.com/the-hottest-idea-in-monetary-policy-2011-10#comment-form

http://www.thedailybell.com/3102/The-Return-of-Milton-Friedman-Via-NGDP-Revenue-Targeting 

Tue, 10/18/2011 - 15:55 | 1786453 Lord Welligton
Lord Welligton's picture

Yes. From the Daily Bail

 

This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers.  Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties.  Now the Fed and the FDIC are fighting as to whether this was sound.  The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input.  You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.

Tue, 10/18/2011 - 16:52 | 1786791 XitSam
XitSam's picture

Quoting http://www.thedailybell.com/3102/The-Return-of-Milton-Friedman-Via-NGDP-... as to how it would work ...

The [Central] Bank should promise to buy and sell unlimited amounts of NGDP futures at the target price, thus making their policy goal equal to the equilibrium market price. Essentially, this would mean the NGDP futures market forecasting the setting of the monetary base that was most consistent with on-target NGDP growth. The monetary base would respond endogenously to changes in money demand, keeping NGDP growth expectations on target.

Two Chevy Volts in every garage! Two filet mignons on every plate! Two PhDs on every wall! Prosperity for everyone!

Tue, 10/18/2011 - 19:45 | 1787292 max2205
max2205's picture

I am just laughing my ass off if anyone thinks the FED, or Treasury or FDIC OR GOD can 'guarantee' a bazillion trillion in derivatives.

That's just two blocks past fantasy land

Tue, 10/18/2011 - 15:51 | 1786429 Urban Redneck
Urban Redneck's picture

The Dismal Pseudo-science's law of supply and demand has been officially revoked by the FED in regards to interest rates.  Whatever money supply increases are required to keep interests rates within a band defined by "acceptable" losses to TBTF will be supplied to keep those losses from materializing. Something about market irrationality and solvency comes to mind...

Tue, 10/18/2011 - 15:59 | 1786470 Buzz Fuzzel
Buzz Fuzzel's picture

No, not revoked.  As with all  the laws of nature they allow for temporary deviations into extremis, the proverbial Black Swan.  Another law to keep in mind, "for every action there is an equal and opposite reaction".

Tue, 10/18/2011 - 16:14 | 1786579 Urban Redneck
Urban Redneck's picture

Instances of hyper monetization tend not to have been remedied by a return to the previous (debased) standard, but rather by the wholesale abandonment of the previous standard and the adoption of a new standard, which may or may not be convertible for holders/owners of units of the previous standard.  Hence, the application of pseudo-science “laws”. 

Tue, 10/18/2011 - 16:55 | 1786790 Buzz Fuzzel
Buzz Fuzzel's picture

The example you use does not refute the law of supply and demand it confirms it.  Your example is a case of demand destruction.  There is not much demand for packaged feces either therefore it's value, like a debased currency is approxamately $0. 

At some point an infinite supply of anything results in a demand of 0.  Anything can be made worthless if enough of it can be produced.

 

Wed, 10/19/2011 - 04:01 | 1788058 Urban Redneck
Urban Redneck's picture

The laws of supply of demand are predicated upon the existence and utilization of a marketplace model for price discovery.  Changing from a market to a command model for price discovery negates the very suppositions which the laws of supply and demand are based on, even if the subsequent behavior of prices could continue to be "explained" or rationalized by the obsolete model. 

When the market pricing mechanism is replaced with a command pricing mechanism in the market for interest rates of the global reserve currency and most common medium of exchange used throughout the myriad global marketplaces, the consequences of the replacement of the pricing mechanism are not limited to that original interest rate market.  In fact, ceteris paribus becomes a logical fallacy when looking at anything other than those very interest rate markets.

Moral hazard and then TBTF were pre-requisites to the FED’s most recent actions, but they were comparative baby-steps by a rapidly maturing beast of economic transformation. 

Wed, 10/19/2011 - 11:57 | 1789148 Buzz Fuzzel
Buzz Fuzzel's picture

Your "command pricing mechanisim" is a temorary aberration.  It is human folly.  It is an example of mans effort to use logic in an effort to overcome natural law or what some would call God's law.  It will only work for a time and when it fails we will be forced to return to natural law.  The longer we violate natural law and attempt to establish our own the greater and more painful will be the ultimate consequence.  Absolute Truth does exist and it will prevail.  Your logic will never overcome this fact.

Tue, 12/20/2011 - 19:03 | 1999253 Liberty2012
Liberty2012's picture

“We can evade reality, but we cannot evade the consequences of evading reality”

 - Ayn Rand

Tue, 10/18/2011 - 15:50 | 1786432 Catullus
Catullus's picture

And... It's gone. This line is for bank customers only.

Tue, 10/18/2011 - 15:55 | 1786449 Caveman93
Caveman93's picture

50% silver and gold...50% Local Credit Union...kill two birds...

Tue, 10/18/2011 - 15:56 | 1786456 americanspirit
americanspirit's picture

If you have an elderly person in your family BE SURE that they don't have any money in BofA, and if they do then don't let up until they have moved it - preferably to a local credit union. If there is anyone in your family who isn't able to take care of themselves BE SURE that their financial manager has moved all their funds away from BofA. If anyone in your family has a CD with BofA, BE sure they cash it in, take any loss that involves, and get their money out of the hands of these vultures. If you are on the Board of a non-profit, BE SURE that your organization has moved any funds it might have in BofA away from their grasp. DO IT NOW! If anyone has a loan from BofA, urge them to get that loan re-financed somewhere else NOW. If any of your children have a trust fund set up for them by their grandparents, see a lawyer and get that trust fund out of the hands of BofA NOW.

BofA is a criminal organization and it is about to explode. All of its officers and Board members ought to be being served with RICO indictments NOW.

Tue, 10/18/2011 - 16:01 | 1786480 Catullus
Catullus's picture

Honestly, if you don't even do the above, at least get hard copies of your bank statements so you can make a claim to the FDIC. You never know if these guys fat finger big ole delete button as they burn the building down on the way out the door.

Tue, 10/18/2011 - 16:18 | 1786603 ebworthen
ebworthen's picture

Agreed.

This is why I REFUSE to go to electronic documents for banking, investment, insurance (not to mention legal documents).

Can you imagine the legerdemain possible when only the corporation has a digital copy?

Robosigning was just the beginning.

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