Sunday, October 23, 2011

Gee if only I could do this with my debt?

Last night a gentleman at the protest was kind enough to give a quick overview about what is going on in this country in terms of our financial situation. Never mind the debt and deficit on the nations accounting books but look at what is going on in the private sector with our big banks. First let me say that even after being bailed out and some supposed changes to the system nothing really changed. The banks have yet to deal with all the subprime mortgages as well as most of the empty properties that they hold as assets, but what is worse is all the bad paper they hold from the unscrupulous selling of those mortgages, sliced and diced until no one knew who owned what. These wonderful pieces of paper when added up amount to a financial time bomb for our nation as a whole. Below is a very brief summary of what they are doing.

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation…

Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

The shorter translation of what's going on here is that they are taking worthless investments and rather than keeping it on their books and eventually writing it off as a loss against their bottom line are dumping it on the American taxpayer (FDIC). Now stop to think that the country's annual budget is only $15 trillion.

And these were the banks that took bail out money to the tune of $2 trillion and gave their CEOs some very sweet bonuses. God Willy Horton was right if you want to rob something go to a bank but in this case if you want to rob a nation be a bank.


The Blog Fodder said...

So what happens if we let all the banks go broke and governments takes over banking? All the real assets still exist. Wipe out all the funny money and such. Seize everything the banks have until the taxpayers get their money back and tell them to go whistle.

BBC said...

I haven't done any dealing with banks for years other than my checking account, and have a credit card I use a lot but keep paid up, it saves me from writing checks cuz we don't get free checks anymore.

I have no idea what condition Wells Fargo is in, and guess I don't really care, if they fold also I'll just switch to another bank.

I guess that some of the small locally managed banks are doing okay, one way or the other I'm pretty sure some banks are going to be around for a long time.

All I really need is a way to get and spend my SS money. Of course, if it goes away I guess I won't have that problem, I'll just barter for things.

I'm willing to do some painting for meals, or sex. :-)

BBC said...

Helen's SS money goes to Bank of America but she won't switch banks. I have no idea how that may effect her if they go down but I guess we'll find out.

BBC said...

"Gee if only I could do this with my debt?"

Gee, if only I had some debt. Well, if I discover I don't have much longer to live I may charge a hell of a big party on my credit card and stick the bank with it.

(Mad laughter in background)

BBC said...

I have money that's doing nothing, maybe I should take up the fine art of being a loan shark.

S.W. Anderson said...

We need an "Oh no you won't" moment here, in which the president serves notice he'll go after the banks to break them up, federalize them if necessary (as happened to the S&L's in the '80s) — whatever it takes.

We also need for derivatives to be outlawed. Of course, that won't happen, so the next best thing is bigger, badder, more rigorous oversight and stricter regulation than the financial markets have ever experienced. They will howl. Let them.

Warren Buffett calls derivatives financial weapons of mass destruction. He couldn't be more right.

Demeur said...

SW none of that will happen because of the likes of Paulson and Geithner.

Billy the real problem would be with the FDIC that couldn't cover the losses.

Fodder problem there is that much of the retirement money in this country is tied into the mess. That would mean defaulting on pension checks. This is an ugly spider web of deception.

Randal Graves said...

Fake money is for board games.