SO YOU THOUGHT THE BANKS WERE THROUGH STEALING FROM US? WAIT TILL THIS CRASHES ON US!

Here's Why Everyone's Freaking Out About BofA Moving Its Derivatives To Its Retail Banks

Bank of America came under further scrutiny this week after Bloomberg reported that the company moved risky derivatives from its investment bank arm to its retail banking unit following a Moody's downgrade last month.

(To clarify: Bank of America Corp. is the holding company that oversees Merrill Lynch — the investment banking division — and Bank of America — the retail banking branch everyday people use.

Derivatives are financial instruments or contracts in which the worth is determined by the quality of the assets they are derived from, such as loans and stocks.)

Although Bloomberg did not attempt to put a number on the value of the derivatives that BofA shifted, the New York Post is reporting that BofA's shift had a notional value of over..... $55 trillion.

The benefits for BofA — and the possible risks to the federal government — in this transaction can be whittled down to two points that many people feel is unfair, because it sounds like another bailout:

1. BofA can save money. Due to the Moody's downgrade, the company will have to set up increased collateral payments or termination fees on contracts (estimated at up to an additional $3.3 billion in a regulatory filing). But shifting the derivatives to the higher rated retail branch may allow them to avoid that loss, Bloomberg columnist Jon Weil pointed out. In addition, BofA will be able to keep Merrill clients happy (they reportedly asked BofA to move the derivatives) and retain their business. Bloomberg reported that a large part of the push behind moving the derivatives came from "clients" and "partners" on their investment banking side.

2. Moving the derivatives to the commercial bank branch means the federal government will be backing the financial instruments. The Federal Deposit Insurance Corp. insures retail banks because it holds people's (taxpayer's) deposits. In the case that the bank collapses, the FDIC is allowed to borrow money from the Treasury to help run the bank and pay back its customers. Although the FDIC does not insure derivatives, Felix Salmon at Reuters points out the banks can use funds in its depository to pay off counterparties - and when there isn't enough, the FDIC will continue payments. That's effectively transferring responsbility from BofA's investment banks to the federal government - from private debt to public debt. (Although, would the government really allow BofA to collapse?)

Another caveat: The move has created a rift between the Federal Reserve and FDIC. BofA believes it has the right to move its derivatives without regulatory approval, according to Bloomberg. The bombshell in the Bloomberg exclusive was that the FDIC is against moving the derivatives — naturally because they do not want to be held responsible in the case the derivatives fail. The Fed, however, has indicated they support the measure, focusing their concerns on the fiscal health of the holding company.



Read more:
http://articles.businessinsider.com/2011-10-21/wall_street/30305411_1_derivatives-bofa-fdic#ixzz1cq9g1g4J

That is scary...first Chase rippin people off and now Bank of America! Who's next???

Keep it under your Mattress!
See how safe it is there,or get Objective Values instead of Fiat-Paper which is not even useful to wipe one's Butt!