In the last couple of days, Bloomberg reported that Bank of America is transferring its high risk derivatives (the so-called Credit Default Swaps or CDs) to a subsidiary that holds deposits. And it is doing so with the approval of Federal Reserve. What that means is that as the subsidiary benefits from insurance from Federal Deposit Insurance Corp (FDIC), high risk or toxic stuff becomes insured by the taxpayers.
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.Or as Yves Smith put it using more direct language:
Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.
But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.Isn't that a classy move on the part of banksters? They realized that with its credit rating in tatters Bank of America might find itself insolvent. How to protect all of our money? Why, we'll get it from the taxpayers. The first time we did it with TARP it begat the Tea Party. What can go wrong?
That's the kind of move that is hardly reported in mainstream media. And if you don't know about this stuff, you believe that Occupy Wall Street protesters are out of touch hippies who resent the hard working Galtian banksters.
Wikileaks and BoA
Speaking of Bank of America, aren't you curious to what happened to Wikileaks owning a hard disk full of incriminating stuff on them? Remember this from October 2009:
"At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive's hard drives," he said. "Now how do we present that? It's a difficult problem. We could just dump it all into one giant Zip file, but we know for a fact that has limited impact. To have impact, it needs to be easy for people to dive in and search it and get something out of it."When in November 29, 2010 Assange confirmed that they were intending to take down a major financial institution every body knew that it was Bank of America. The Bank went into defensive, hired Booz and Allen (a security and defense contractor), started aggressively buying domain names that can be used against its executives and prepared a comprehensive attack plan on Wikileaks and its supporters (including Glenn Greenwald.
Then something strange happened. Wikileaks' Number Two and Assange's long time collaborator Daniel Domscheit-Berg abruptly left the organization and on his way out, he destroyed part or all of the Bank of America files. He confirmed their destruction but denied having done so. And of course Bank of America also denied any involvement.
Since then everyone forgot about the fraud files that were supposed to be so explosive that the Bank frantically made comprehensive plans to deal with the aftermath of their release.
This is from the BBC site about half an hour ago
Wikileaks founder Julian Assange said that since last December an "arbitrary and unlawful financial blockade" had been imposed by Bank of America, Visa, MasterCard, PayPal and Western Union.
"The attack has destroyed 95% of our revenue," he said.I guess that answers my question.