Fed shotgun wedding of BofA and Merrill

Quote from nravo:

The ones I truly feel sorry for are BOA small shareholders, people with IRAs, 401ks, company stock. The government literally forced them to take huge losses so ML shareholders wouldn't be totally wiped out or get a worse price from another buyer. Bizarre. Absolutely fucking bizarre.
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How's this for lip-service:


Lewis said he did nothing wrong. In the end, the decision to go ahead with the acquisition -- with the promise of government support -- was in everyone's best interest, he testified.

"This course made sense for Bank of America and its shareholders (LMAO!!), and made sense for the stability of the markets," he said. "We viewed those two interests as consistent."
http://finance.yahoo.com/news/CEO-US-pushed-bank-to-buy-apf-15504789.html
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The systemic-risk argument is based on short CDS exposure taken by large banks and investment houses during the run-up.

10 insurance policies were sold on every 'company', so if one collapsed, the payouts would bankrupt a couple more, starting a chain reaction of failures that would ultimately destroy all companies that wrote credit-default swaps.

This is the essence of what our chicken-little friends parrot without having a clue as to what they're talking about.

All the Government had to do was step-in, nullify and ban CDS - which is within their regulatory auspices to do so (an asset-class Warren Buffet rightly coined "financial weapons of mass destruction") - and let the system purge itself.

That contractual dissolution mediated by Government is of the exact same caliber used by Obama to force GM into bankruptcy, used by Bernacke to coerce Lewis et al to castrate their shareholders and submit to a shotgun wedding etc. And if the Helicopter-Crew want to cheerlead for "emergency powers" validating force majeur, they'd have to agree those same powers extend to the rouge instrument-class that levered-in this entire crisis, to begin with! == Nullify CDS.

Except that would actually solve the crisis.

The total value of US subprime mortgages is 1.3 Trillion dollars. Which is why the Treasury and Fed have spent over 6 Trillion AND committed another 8 TRILLION. Ring any alarm bells, yet?!?

The whole thing is a gigantic Madoff-esque scam run by Wallstreet Boys dangling the knife of crippling derivative losses over the US economy. Then we've got several Congressmen threatened with Martial Law if they didn't pass Bailout#1 and #2.

Btw, the Federal Reserve is owned and run by the very Banks who are direct recipients to the Trillions in Bailouts. Bankers voting themselves a bailout.

Oh, and two high-ranking Democratic Senators went on record and said Bankers OWN Congress. On record.

And then we've got the rank-and-file CNBC toadies piping-up, smugly declaring nothing stinks in Denmark!! Which is laughably ignorant. But hey.
 
Quote from Daal:

http://www.federalreserve.gov/newsevents/press/enforcement/20090323b.htm

Tell that to G. Craig Chupik a former vice president, loan officer of PlainsCapital Bank who agreed to be banned from banking and pay fees after doing unsound banking practices. You can see on the fed page that tons of people 'agree' and consent to fed demands, I'm told that is because the fed can initiate criminal prosecutions against those people and courts usually rely on the REGULATOR to determine who is right. So if this goes to the Supreme Court(which is doubtful), they will look at the fed authority(in this case they did not even use anything, there was no guns involved, simply an agreement through pressure) and will have to rely on the fed judgement, that is because they dont know how to analyze banking and whats correct or not

I dont expect to convience you though, your just one more fed basher who will go into a grave swearing that without a fed world peace would prevail
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Dude, the guy you cite admitted to unsound practices. Did BOA do this? Shit yeah, if some guy is a crook or the bank is insolvent the Fed can and should act. But BOA was neither.
 
Quote from achilles28:

How's this for lip-service:




The systemic-risk argument is based on short CDS exposure taken by large banks and investment houses during the run-up.

10 insurance policies were sold on every 'company', so if one collapsed, the payouts would bankrupt a couple more, starting a chain reaction of failures that would ultimately destroy all companies that wrote credit-default swaps.

This is the essence of what our chicken-little friends parrot without having a clue as to what they're talking about.

All the Government had to do was step-in, nullify and ban CDS - which is within their regulatory auspices to do so (an asset-class Warren Buffet rightly coined "financial weapons of mass destruction") - and let the system purge itself.

That contractual dissolution mediated by Government is of the exact same caliber used by Obama to force GM into bankruptcy, used by Bernacke to coerce Lewis et al to castrate their shareholders and submit to a shotgun wedding etc. And if the Helicopter-Crew want to cheerlead for "emergency powers" validating force majeur, they'd have to agree those same powers extend to the rouge instrument-class that levered-in this entire crisis, to begin with! == Nullify CDS.

Except that would actually solve the crisis.

The total value of US subprime mortgages is 1.3 Trillion dollars. Which is why the Treasury and Fed have spent over 6 Trillion AND committed another 8 TRILLION. Ring any alarm bells, yet?!?

The whole thing is a gigantic Madoff-esque scam run by Wallstreet Boys dangling the knife of crippling derivative losses over the US economy. Then we've got several Congressmen threatened with Martial Law if they didn't pass Bailout#1 and #2.

Btw, the Federal Reserve is owned and run by the very Banks who are direct recipients to the Trillions in Bailouts. Bankers voting themselves a bailout.

Oh, and two high-ranking Democratic Senators went on record and said Bankers OWN Congress. On record.

And then we've got the rank-and-file CNBC toadies piping-up, smugly declaring nothing stinks in Denmark!! Which is laughably ignorant. But hey.
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You got it, sport. COngress and the Fed and the WH are banking on, pardon the pun, the gullibility and ignorance of Americans about these issues.
 
Quote from nravo:

Dude, the guy you cite admitted to unsound practices. Did BOA do this? Shit yeah, if some guy is a crook or the bank is insolvent the Fed can and should act. But BOA was neither.
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Lewis was threatening another Lehman type event, heres the thing it doesnt matter if you disagree and think that merryl could fail without a problem THE FED DIDN'T THINK SO, they made their judgment and as a regulator they are allowed to do that
 
Frankly, why waste time with morons that think we should stand on ceremony during a crisis.

Absolutists are free to commit suicide at will.
 
Quote from WaveStrider:

They are calling on Paulson and Bernanke to testify.

Get the popcorn ready for that one.
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Somebody will be lying (or have a very warped idea of the powers stemming from the Federal Reserve Act and the executive branch.) I really do think that someone's head will roll here. If I was a BOA shareholder, I would, at a minimum, personally sue Bernanke and Paulson and attach liens on their homes. SAd fact is that most individual BOA shareholders don't even have a clue.
 
While we are talking about investigating the Feds... the whole verbal denial of TARP funds for National City Bank stinks to high heavens also... considering they gave National City's TARP allotment to PNG with the caveat that PNG acquire NCC.
 
Quote from bigmoose:

While we are talking about investigating the Feds... the whole verbal denial of TARP funds for National City Bank stinks to high heavens also... considering they gave National City's TARP allotment to PNG with the caveat that PNG acquire NCC.
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It's been a whole multi-headed mess from the get-go, Paulson Bernanke and Geitner all scared Congress and the rest of the country into doing shit that no one understood, just to save everyone's political ass and Wall Street. They could give a flying fuck about Main Street, trust me. Now, the dust is settling and we see what has been going on, but I bet at some point chickenshit Obama is just going to pardon everyone saying it was a bunch of mistaken judgements in the fog of war, hindsight is 20-20 or some other bull-shit.
 
Quote from nravo:

Explain specifically how the consequences, specifically, would be staggering if someone else had bought ML at a lower price, a la Bear, or not at all, a la Lehman? What would happen besides ML shareholders getting wiped out and bond holders taking a huge haircut? You are parroting the same scare-speak that Wall Street peddles to keep their jobs. Hell, I would do the same thing. Gimme me money, bail me out or else the sky will fall. Trust me: no one on the Street or in banking really believes this. Just retail traders, CNBC, the idiot American public and Congress, which has been bought and paid for by Wall Street to believe it.
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Well, it's quite obvious to me that you, nravo, and others making a similar argument, were nowhere near the money mkts in the aftermath of Leh. I was, however; and smack in the middle of the carnage too. You obviously will not take my word for it, but I'll tell you anyways that things were getting very dire indeed and people were stocking up on canned goods.

Secondly, why would you assume that I am not intelligent enough to make my own argument? Why would you suggest that I am parroting anything? If you're taking the time to argue with me, I would have thought it obvious you should extend me the courtesy of not assuming I am an idiot.

For your guide, I am not willing to 'trust you', because, as far as I am concerned, you don't know what you're talking about. I am one of those people you suggest doesn't believe 'the scare-speak'. I will tell you that I WAS genuinely scared when the CP mkt completely broke down and there was a danger that paychecks weren't gonna get mailed to people.

Finally, I am not going to argue with you about the merits of the Mer takeover. It's useless, because there's too much of 'what if' and 'would have' in that and it would be impossible for us to agree. All I would suggest is for you to think of the asymmetric payoff of the Mer situation. The potential downside from letting Mer go was monstrous, while what would we have gained, apart from the satisfaction of abiding by some high-falutin', and most likely compromised, principle (free mkt, moral hazard, whatever)? Given the situation, somebody had to make a call. I think they made the right call and, moreover, as a guarantor of financial stability, they were perfectly within their rights.

Finally, I would suggest that there are lessons that history has taught us. One of them is that a hands-off and doctrinaire Fed causes big problems.
 
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