The craven and continual bailout of the Too Big To Fail banks by the Obama Administration isn’t working. BofA is wobbling badly, so is Goldman. The policies of Geithner at al have been a complete failure. They’ve given the TBTF banks trillions (literally) yet the crisis is back. But this time it’s with the really big banks and countries as well. That’s what happens when the Fed and European central banks hugely and deliberately over-value toxic garbage owned by banks.
The central problem is that the bankster class refuses to take haircuts on their holdings and bonds, forcing everyone else to pay for it. This must end. If Obama can’t change this, then let’s get a president who can. Because 2008 may have just been a warm-up. And Bank of America is the poster child this time.
But first, Goldman CEO hires criminal defense law firm. Stock tanks.
Couldn’t happen to a more deserving bunch of slime.
On to Bank of America:
Bank of America has about $222 billion of “book value”–the amount that’s supposedly left over when you subtract Bank of America’s stated liabilities from its stated assets.
The trouble is that the market doesn’t believe Bank of America’s assets are worth anything close to what Bank of America says they are worth. The market also doesn’t believe that Bank of America has reserved anywhere near enough to pay the costs of litigation surrounding its mortgage behavior during the housing boom.
Why is BofA stock cratering yet again? It’s the extend and pretend endgame
We are now seeing the downside to extend and pretend. Years of regulatory forbearance mean that investors know the marks on the balance sheet of a beast like Bank of America (and frankly all the other big banks) have a ton of air in them. And now that the economy is looking seriously wobbly and the odds of son of Credit Anstalt are well above zero, it means big banks are at real risk of getting seriously whacked in a major stress event.
How BofA’s reserve accounting errors are one giant “Subprime CDO”
A bankruptcy of Bank of America would be hundreds of times more severe than Lehman’s
BofA credit default swaps now offered at all time wides
CDS are private pseudo-insurance that big players buy and sell on companies and countries. The widening spread means traders are getting nervous about the health of BofA, as well they should.
The reason the Obama camp is trying to declare victory and go home is that it is afraid that any serious effort to deal with the mortgage mess will reveal the insolvency of the banks.
Stocks And credit in full disconnect mode
This won’t last. Stocks will follow the wobbly credit markets
Mirabile dictu! New York Times tells Obama Administration off, backs Schneiderman on mortgage settlement
The editorial in today’s New York Times may be a sign that the tide is turning. The elites are starting to break ranks with the mortgage industrial complex.
Good. Even some of the elites have now had it with the Obama Administration giving the TBTF banks a free pass on everything, funneling them trillions, and changing the accounting rules just for them so they can pretend their assets aren’t toxic. This fundamentally dishonest approach is both morally bankrupt and utterly ineffective.