The Too Big To Fail–just shafted you and me, again

(Source: The Daily Bail )

HOLY BAILOUT: Federal Reserve Now Backstopping $75 Trillion in Bank of America’s Derivatives

Posted on October 22, 2011 by Jean; The Daily Bail

This story from Bloomberg just hit the wires [October 19 2011].  Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.

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.

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Do parasites, like this, infest our economy?

Well, do they?

Arguing with the forces that appear to be, legitimizes them. They are illegitimate and have no real basis for existence as they are. They are parasitical entities. They are ticks. (Source)

PhD economist Michael Hudson says that the financial “parasites” are “sucking as much money out” as they can before “jumping ship”. . . The problem with parasites is not merely that they siphon off the food and nourishment of their host, crippling its reproductive power, but that they take over the host’s brain as well. The parasite tricks the host into thinking that it is feeding itself. (Source)

Sacculina Carcini parasite

Saculina Carcini is an extraordinary creature, a barnacle that degenerates practically into a plant. It starts life as a free-swimming larva that invades a crab then changes into a microscopic slug, which plunges into the crab’s underside and sprouts “roots” that draw in nutrients from the crab’s blood.

The crab’s immune system cannot fight off Sacculina. but continues living with the parasite filling its entire body and begins to change into a new sort of creature. One that exists to serve the parasite. Externally it appears the same, but internally it is merely a puppet controlled by the intruder. (Source)

See any parallels?

But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”

The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. (Source)

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