More on this theft reported to you yesterday...
By Madison RuppertOctober 20, 2011
BlacklistedNews.com
Only three years ago the American people had massive debts piled on our heads by being forced to bail out the biggest lenders in the United States.
During this bailout, Bank of America received a whopping $45 billion and as of midyear had deposits numbering some $1.04 trillion.
Now Bank of America is attempting to protect itself from its derivative exposure through its Merrill Lynch unit by moving derivatives to a subsidiary replete with insured deposits.
This means that if the bank were to fail, the Federal Deposit Insurance Corporation, or FDIC, would be on the hook for paying for the moved derivatives.
If the derivatives remained in Merrill Lynch, which is not insured by the FDIC and thus the taxpayer, and the bank were to collapse, the money would be lost.
Unsurprisingly, the private Federal Reserve has absolutely no problem with the move, while the FDIC is objecting according to anonymous sources cited by Bloomberg.
Even more unsurprisingly, Bank of America thinks that no regulatory approval is needed, regardless of the fact that this is an openly fraudulent way of insuring items which should never be insured.
This is surreptitiously timed given Moody’s downgraded Bank of America’s long term credit ratings on September 21st, slashing both the holding company and the retail bank’s ratings by two notches each.
Section 23A of the Federal Reserve Act is supposed to act like a firewall, preventing the affiliates of lenders from gaining from the lenders’ federal subsidy and also to protect the bank from risks originating from the affiliate, according to Saule Omarova, a University of North Carolina at Chapel Hill law professor.
This section was created because, “Congress doesn’t want a bank’s FDIC insurance and access to the Fed discount window to somehow benefit an affiliate,” Omarova said to Bloomberg.
However, in September of 2010, Bank of America was officially given a letter of exemption from Section 23A, effectively ending what the Federal Reserve’s general counsel, Scott Alvarez, told Congress in 2008 “is among the most important tools that U.S. bank regulators have to protect the safety and soundness of U.S. banks”.
So, with the help of the Fed, Bank of America is already exempt from one of the most important impediments to banks going out of control.
And now the Fed is once again backing the Bank of America’s attempts to undermine what little regulation we have in the banking system by putting the American people on the hook for their derivative exposure.
Bill Black, a Professor of Economics and Law at the University of Missouri – Kansas City, summed the issue up nicely in an e-mail to Washington’s Blog:
1. The bank holding company (BAC) is moving troubled assets held by an entity not insured by the public (Merrill Lynch) to the Bank of America, which is insured by the public
2. The banking rules are designed to prevent that because they are designed to protect the FDIC insurance fund (which the Treasury guarantees)
3. Any marginally competent regulator would say “No, Hell NO!”
4. The Fed, reportedly, is saying “Sure, no worries” by allowing the sale of an affiliate’s troubled assets to B of A
5. This is a really good “natural experiment” that allows us to test whether the Fed is protects the public or the uninsured and systemically dangerous institutions (the bank holding companies (BHCs))
6. We are all shocked, shocked [sarcasm] that Bernanke responded to the experiment by choosing to protect the BHC at the expense of the public.
It is also worth noting that Bank of America has been guilty of refusing to let customers close accounts in what are essentially mini-bank runs. Unfortunately, this is not isolated to one branch as you can see in the following videos: ...watch/read more>>
