Tag: Bank of America

BofA delays Countrywide bankruptcy

BofA delays Countrywide bankruptcy

The word is that BofA did in fact consider declaring their Countrywide subsidiary bankrupt to ring fence the rest of the company from Countrywide. It got as far as a board vote this past summer.

This Wall Street Journal video discusses the issues of why it has postponed the bankruptcy filing.

Bill Black on potential Bank of America derivatives losses

Bill Black on potential Bank of America derivatives losses

In the video below, Bill Black discusses the issues he raised in a recent post about Bank of America’s accounting activities. At issue is the effect of its shift of assets from the holding company to its FDIC-insured subsidiary. In total, Bank of America owns derivatives with a notional value of $75 trillion. The Federal Reserve authorised this accounting manoeuvre despite FDIC objections.

Bank of America’s Death Rattle: Not with a Bang, but a Whimper

Bank of America’s Death Rattle: Not with a Bang, but a Whimper

Bob Ivry, Hugh Son and Christine Harper have written an article that needs to be read by everyone interested in the financial crisis. The article (available here) is entitled: BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit. The thrust of their story is that Bank of America’s holding company, BAC, has directed the transfer of a large number of troubled financial derivatives from its Merrill Lynch subsidiary to the federally insured bank Bank of America (BofA). The story reports that the Federal Reserve supported the transfer and the Federal Deposit Insurance Corporation (FDIC) opposed it. Yves Smith of Naked Capitalism has written an appropriately blistering attack on this outrageous action, which puts the public at substantially increased risk of loss.

I write to add some context, point out additional areas of inappropriate actions, and add a regulatory perspective gained from dealing with analogous efforts by holding companies to foist dangerous affiliate transactions on insured depositories. I’ll begin by adding some historical context to explain how B of A got into this maze of affiliate conflicts.

A year later everyone is catching on about Fed policy and net interest margins

A year later everyone is catching on about Fed policy and net interest margins

Last November, in anticipation of QE2, I wrote a post called “How Quantitative Easing and Permanent Zero are Toxic To Bank Net Interest Margins”. The gist of the post was that if the ‘extended period’ for low rates was too long, net interest margins would suffer, especially during a recession. I was looking at Japan and their economic policies and seeing low yields and super-low net interest margins killing bank earnings. Now that we are seeing more movement down on net interest margins (BofA and Wells Fargo both showed margin compression for example), the mainstream media is finally catching on to the connection between Fed policy and net interest margins. You heard it here first though.

A Credible Solution to Europe’s Debt Crisis

A Credible Solution to Europe’s Debt Crisis

In April 1989, Mexico’s external debt negotiator, Angel Gurria, asked his country’s commercial bank creditors for a 55 percent haircut. This was the opening pitch of the newly created Brady Plan, which finally addressed both the debt overhang of developing countries and the weak balance sheets of their commercial bank creditors, ultimately resolving the LDC Debt Crisis.

More than twenty years later, Europe is in the midst of a similar sovereign debt and banking crisis. The EU is in a destabilizing feedback loop that it cannot control. Sovereign credit is deteriorating and this is reducing confidence in national banking systems, causing or increasing the likelihood that sovereigns will have to assume bank liabilities. This further impairs the sovereign credit and increases the lack of confidence in the banks.

We review the basic tenets of the Brady Plan in the context of our personal experience working on many of these sovereign restructurings and how they could apply in a comprehensive solution for the European debt crisis. The markets and the Eurozone desperately need a positive confidence shock in the form a comprehensive plan that simultaneously addresses the sovereign debt overhang and the balance sheets of European commercial banks.

Countrywide Control Fraud, Inch Deep Prosecution

Countrywide Control Fraud, Inch Deep Prosecution

By William K. Black I write to contrast four recent stories about Countrywide. Here are their headlines and brief synopses provided in the initial paragraphs of the stories. U.S. drops criminal probe of former Countrywide chief Angelo Mozilo Mozilo’s actions in the mortgage meltdown — which led to $67.5-million settlement against him — did not amount to criminal wrongdoing, federal […]