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People notice that BoA is ripping off Taxpayers

October 21, 2011

Felix Salmon notices:  BofA puts taxpayers on the hook for Merrill’s derivatives

Business Insider Notices: Here’s Why Everyone’s Freaking Out About BofA Moving Its Derivatives To Its Retail Banks

#OWS notices: http://occupywallst.org/forum/bank-of-america-dumping-merrill-lynch-dividends-in/
Here is the question: Does it matter?  As beowulf points out – this is clearly illegal and shouldn’t happen.  But does it even matter anymore?

Who can we even call about this?  Who is watching the watchmen?










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  1. beowulf
    October 21, 2011 at 4:45 pm

    From Business Insider link:
    “This kind of movement of derivatives by BofA might technically not be legal. Section 23A of the Federal Reserve Act limits the amount and regulates the quality of assets that can be moved between non-bank factions and banks because of the risk it poses to federally-insured deposits, according to Bloomberg… But after the financial crisis, several banks were granted exemptions from Section 23A (they were later taken away). As for BofA — they were allowed an exemption until March 2010, and another exemption was granted in September 2010”
    From America Banker Association excellent outline of Dodd-Frank law
    “The Act amends the Fed’s authority to issue exemptions from Sections 23A and 23B, by conditioning that authority on the Fed’s notification to the FDIC of its finding that the exemption is in the public interest and the absence of a written response from the FDIC within 60 days of notification that the FDIC finds the exemption poses an unacceptable risk to the Deposit Insurance Fund.”

    Hot damn! some lobbyist earned their fees on this one.
    OK I was wondering what month and day BoA made this move. I read at the ABA outline that, “The provisions regarding affiliate transactions are effective 1 year after the Transfer Date”.
    Now if bill passed July 21, 2010, logically, you’d think 1 year after transfer date (which sounds like an odd synonym for bill passage or enactment date) would be July 21, 2011, which actually is kind of a long time for a new regulation to kick in.

    But that would be wrong. You see in Dodd-Frank, “transfer date” refers to the period 1 year AFTER bill passage date when OTS dissolved and transfers regulatory functions to OCC. Those new regs start 1 year AFTER THAT. So the Dodd-Frank regulation that prohibits (w/o FDIC consent) precisely the thing BOA is doing now… doesn’t kick in till July 21, 2012, exactly 2 years after the date of enactment. Since everyone has been focusing attention to Dodd-Frank for the last year and a half, God only knows what loopholes in the old law BOA can dive through until next July. The only more pathetic example of lobbyist written regulation is probably Obama’s universal health insurance plan taking a four year nap before starting to work (bill passed 2010, universal coverage begins, in theory, 2014).
    The Fed has a helpful timeline:
    Dodd-Frank Act: Statutory Dates For Actions
    Statutory Language Corresponding Action Date
    1 Day after date of enactment July 22, 2010
    3 months after date of enactment October 21, 2010
    Title III transfer date/Transfer date under Title III* July 21, 2011
    Designated transfer date (Title X transfer date)* July 21, 2011
    90 days after designated transfer date October 19, 2011
    2 years after date of enactment July 21, 2012
    18 months after date of enactment January 21, 2012
    1 year after the Title III transfer date July 21, 2012


    • TC
      October 21, 2011 at 8:13 pm

      As I am thinking about this more, this line sticks with me…

      For one, putting derivatives into the commercial lending branch is something that all banks have done. As we noted before, the Fed granted Section 23A exemption to a lot of banks, and they used it. Derivative-holding giant J.P. Morgan has almost all its derivatives held in its retail operations. (Though some say J.P. Morgan’s derivatives are regulated differently than BofA’s.)

      Another interesting thing that Weil points out is that most of BofA’s derivatives are already in its retail side.

      Interesting, interesting.

      I’ve traded lots of “derivatives” in the form of futures and options. futures, options, and plain vanilla Interest rate Swaps aren’t dangerous and aren’t going to cause problems. But what’s over at Merrill? Merrill is a former NYC investment bank.

      “With the brokerage and the BlackRock shares worth more than $35 billion combined, and Merrill’s market capitalization at around $26 billion, investors are ascribing a negative value to the investment bank, implying huge potential embedded losses.”



  2. Tom Hickey
    October 21, 2011 at 7:07 pm

    “Who can we even call about this?”

    OWS is on it already. Vigilantes are the only semblance of cops left on the beat.

  3. October 24, 2011 at 2:57 pm

    Soon, BofA (Skank of America), Shitty Bank, Well too Far to Go, and go-Chase-yourself will be reporting their yearly bonuses, just in time for Christmas. Watch as OWS goes ballistic once the figures are released, at the extreme dichotomy Treasury & Congress have set up as directed by the Large Banks who watered down all the regulations, removed the teeth, and funded each key campaign.

    I am considering investing in pitch forks and torches, as there will be world wide shortages on those in the coming months. Armored car sales, polyaramide manufacturing, and executive security contract firms will also likely see huge up-swings in demand.

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