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Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
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It's just getting worse for BofA. It appears that a run on the bank is developing electronically and from the branch level. Meanwhile the stock is heading right back to the recent low's. Pretty crazy to see this unfold but we knew it was bound to happen. There was a report on Reuters by Christopher Whalen talking about the latest move by BofA moving Merrill's derivatives to the BAC deposit entity as a preemptive move towards bankruptcy.
And here's just one sample of the main street's view on BAC...
Update: I just wanted to add one other important issue regarding BofA and any other bank moving their derivatives exposure over to the FDIC insured entity. If this bank were to fail, the CDS investors have first right at the bank's assets even before the depositors. If that doesn't give you a chill down your spine what will? This is simply unacceptable and of course we're hearing very little about this in the MSM.
What would a failure of a TBTF bank look like? A bank with a trillion in deposits... and tens of trillions of derivatives... I'm just trying to understand how the collapse would take shape, or more accurately the fall out.
Do you really think there would be another bail out? In recent interviews/press statements, politicians are quick to reframe the 2008 bailouts as necessary to prevent an utter collapse of our economy. So would this excuse be used again to rush in and save BofA?
Would they split it up, and try to get Citi, Wells, Chase etc to take huge risk-free government backed stakes? Those banks are already TBTF, now they are too bigger to fail, even more than already, if such a thing were to happen.
No one can really acquire the assets or debt of BofA. That is my point. The only remaining possibility is for the entire bank to collapse into oblivion, or for the government to bail them out.
I would hope we could just bring the marshmellows and watch them burn to the ground. It would definitely be ugly for everyone if for no other reason the stock market would panic and sell everything in sight. After the fallout (and the marshmellows consumed) I don't see any reason why smaller local banks that aren't directly invovled couldn't pickup the pieces. We have to stand aside and let happen what may. Everyone that's honest knows this crap can't continue and the only way to really slove the problem is to start over. If for some reason they do manage to survive without intervention that's fine too. As a last thought the congress and more specifically republicans have boxed themselves in to a posistion where there is no way they could support a bailout of any kind as I see it. So if BAC or any other sinks there will not be any life raft sent out to them. Honestly, no one wants to see these guys burn because of the pain we will all feel but I'm getting more and more convinced they will.
You may be right -- if we don't see a repeat of Lehman, then an investment of say 10k might have risk of losing 90-100% of its value, but if it doesn't, the potential upside could be many times over, over the course of maybe ten to twenty years. Assuming the economy doesn't collapse, we don't blow ourselves up, and the USA doesn't go the way of the Roman Empire...
Angelo Mozillo (sp?) must be very happy to see this.
