BofA is Collapsing

[Camtender]

http://kingworldnews.com/kingworldne...is_Whalen.html

Chris is one bad dude.

[don]

Re: BofA is Collapsing

Great Post!

[Starving Steve]

Re: BofA is Collapsing

How does Bank of America go bankrupt if it is a member of the TARP? How would any bank lose money when it can borrow from the TARP at virtually zero percent and buy 30year U.S. Treasury debt that yields >4%? That is a 4% risk-free spread, guaranteed by the U.S. Treasury for 30 years. How does a bank lose when it is guaranteed a risk-free income for life, in billions of dollars of TARP money?

I'll stay after class, and maybe someone can explain this new Princeton economics to me; i.e, why Bank of America needs more money? And how do I become a bank and join the TARP? Plus, all my bad loans get pawned-off onto the TARP....... I LOVE IT! And these were the Democrats that did this?

[ThePythonicCow]

Re: BofA is Collapsing

BofA is Collapsing

It's not just BofA. It's also local, state and national governments, pension funds, FIRE corporations, the other large banks and many small banks, the Federal Reserve and other central banks, hedge funds, ...

The U.S. Federal Reserve has been the keystone. Sometime in the next year, likely sooner, we will see a run on U.S. Treasury debt. The Fed will hold yields down by monetizing them, but this will create a tsunami of cash seeking other homes. That cash will go to gold and commodities. Gold will rise, sometimes sharply, to $1500/oz within six months, to $2000/oz within twelve months.

The run will not start with China or some foreign entity. It will start with major banks and investment firms heavily invested in U.S. Treasuries.

I say this based in good part from my readings (perhaps misunderstandings ?) of Jim Willie, Bob Chapman, and Gonzalo Lira.

Playing the stock market these days is like playing Russian Roulette with a revolver that has 100 chambers. Ninety-nine chambers have solid gold duds that yield a harmless, valuable, quarter ounce of gold each. One chamber has a hollow point magnum. If the market goes up gently 99 out of 100 days, but loses all those gains and more in a one hour flash crash (that doesn't recover and during which retail trading is neigh impossible), then it is a losing game.

Money has been moving out of the stock market into bonds and U.S. Treasuries continuously for over a year now. Only high frequency trading gimmicks and stealth Federal Reserve monetizations are keeping the stock market up. We are all herding on to the giant unsinkable USS Federal Reserve Titanic, seeking safety. ... then they sink it.

A giant tsunami is flushing out the wild animals from the jungle. Chris Whalen is warning us of one of the leopards (BofA) running our way. He is too much of an insider to warn us of the tsunami behind that leopard.

[Camtender]

Re: BofA is Collapsing

Chris on CNBC in July, watch him, well worth it.

http://www.youtube.com/watch?v=znTHTUvzN8k

[tsetsefly]

Re: BofA is Collapsing

excellent interview, at the risk of sounding like a moron, the putbacks he is referring to are what? mortage related, the ones due on sept 30?

Aside from that a couple of great points I thought:

1. The problem goes back farther than Greenspan, he dates it around WWI, needless to say the FED was created 4 years before WWI to help "avoid" the very disasters they have created.

2. Fed and government policy caused this.

3. This quote rings so true: The banks where de-facto nationalized a long time ago, "they(government) turned them into loan production offices for fanny and freddie".

[Camtender]

Re: BofA is Collapsing

excellent interview, at the risk of sounding like a moron, the putbacks he is referring to are what? mortage related, the ones due on sept 30?

Pushbacks are forced loan repurchases on mortgage originators, think Countrywide.

The new loan putbacks are coming from Fannie Mae and Freddie Mac, which generally have more power to return loans than private investors. If you're a mortgage banker, and you sell a loan to a GSE-sponsored company, the number one thing you have to be worried about is that at some point, that loan is going to have to be repurchased due to a fraud claim by the GSE.

[Jay]

Re: BofA is Collapsing

The run will not start with China or some foreign entity. It will start with major banks and investment firms heavily invested in U.S. Treasuries.

Who jumps then? Why would they? Any major bank with enough of a presence to upset the Treasury market has already been saved by the Fed. Now the big banks make free money courtesy of Fed bailout policies and have offloaded a ton of their crap onto the Fed's balance sheet. They will protect their mother and go down with the ship. If they hadn't been willing to ringfence the problem and keep their mouths shut from the outset, the whole thing would have blown already. They are the private stock holders in the Fed! If the Treasury market goes, the Fed goes too. Talk about cutting off your nose to spite your face.

If TSHTF, the big banks will all get together in an emergency meeting with the Fed, the IMF and likely the BIS and figure out what to do, in a typical reactionary style. I doubt one of them jumps first. Remember, they are all rich beyond their wildest dreams because of what is happening. If someone jumps first, they will have a horses head in their bed in the morning.

[oddlots]

Re: BofA is Collapsing

Outstanding. The thing that drives me most mad about the crisis is we always had an existing framework for working this out that no-one even yet wants to talk about or acknowledge. It's been like watching a novice skydiver plummet to his death while you yell PULL THE RIP CORD! It's simply: bankruptcy with government receivership, restructuring, wiping out the equity, giving the bondholders a severe haircut, replacing management and then refloating the entity that has been recapitalised with public funds. Given the choices an excellent investment of the public treasury in the country's recovery.

Instead you have the mirror opposite: no changes in management (much less indictments: see W Black); no real pain for the bondholders; particularly no "reward" for the equity holders - i.e., being wiped out (but at least they collectively got a roller coaster ride in aggregate); public participation but no upside and certain massive losses... with no hope that it will ever lead to any tangible benefits at all to anyone except crooks EVER.

It is really stunning even with a few years hindsight.

Really if you want to know who the ultimate sh!ts in this whole affair were circa 2007-8 it's anyone who suggested - even as a TV talking head presenting "perspective" - that there was anything socialist about "nationalisation" of banks. As I've said before, there's nothing socialist about a bankruptcy judge. In fact a free market assumes his / her existence. It's the foundation of it. Anyone who suggests otherwise is trying to get a leg over or make-off with some ill-gotten gain. (Tea Partiers please apply this test.)

[BuckarooBanzai]

Re: BofA is Collapsing

According to Jim Willie CB, Bank of America has now joined the Walking Dead.

"By the way, a deep contact informs that Bank of America suffered a death experience on the weekend of July 24th, the same weekend that the London Bullion Market Assn went dark on reported data. Around the same time the Bank For Intl Settlements was fumbling around with phony stories regarding their 340 ton Gold Swap contract. The truth is... the BIS bailed out the London metal exchange, on the edge of default, which has suffered repeated gold raids. They have been forced to defend against a sequence of coordinated raids, all legal, demanding vast gold bullion and obtaining it. The BIS bailed out not commercial banks, not the Portuguese central bank, but the London metal exchange. The LBMA is struggling to avoid completely empty inventory. More BIS backdoor supply handoffs will come. Expect the gold raids against London to continue until the corrupt Anglo bankers are plowed under like a weeded lawn laced with rubbish. Soon a big bank will fall, from the incremental drain from losses defending the gold price without success. My guess is Bank of America. It will be absorbed by the titans on Wall Street, the corrupt monoliths. Eventually only two will stand, by the time the USTreasury default approaches."

http://news.goldseek.com/GoldenJackass/1284667200.php

[Jay]

Re: BofA is Collapsing

According to Jim Willie CB, Bank of America has now joined the Walking Dead.

"By the way, a deep contact informs that Bank of America suffered a death experience on the weekend of July 24th, the same weekend that the London Bullion Market Assn went dark on reported data. Around the same time the Bank For Intl Settlements was fumbling around with phony stories regarding their 340 ton Gold Swap contract. The truth is... the BIS bailed out the London metal exchange, on the edge of default, which has suffered repeated gold raids. They have been forced to defend against a sequence of coordinated raids, all legal, demanding vast gold bullion and obtaining it. The BIS bailed out not commercial banks, not the Portuguese central bank, but the London metal exchange. The LBMA is struggling to avoid completely empty inventory. More BIS backdoor supply handoffs will come. Expect the gold raids against London to continue until the corrupt Anglo bankers are plowed under like a weeded lawn laced with rubbish. Soon a big bank will fall, from the incremental drain from losses defending the gold price without success. My guess is Bank of America. It will be absorbed by the titans on Wall Street, the corrupt monoliths. Eventually only two will stand, by the time the USTreasury default approaches."

http://news.goldseek.com/GoldenJackass/1284667200.php

This furthers my point, all the central Anglo players are covering up for each other. And will until burnt by the sun.

[ThePythonicCow]

Re: BofA is Collapsing

They will protect their mother and go down with the ship.

Thieves, honor? Oxymoron?

Who jumps then? Why would they?

Initially it would not be a big jump. Rather it would be perhaps a shift by one or two institutions of some of their Treasuries to oil or another commodity that had a modest uptick, suggesting more profit potential. Then it would snowball, as it became evident to more and more players that the Fed was monetizing all Treasuries offered up for sale.

Look at it this way. I am confident, and I presume you are as well, that we will not have continuous ZIRP and expanding Treasury debt, uninterrupted, for the next one-hundred years.

Something will change, somehow, sometime before then.

• Which of the institutions holding significant quantities of Treasuries would you least trust to look out for any interest but their own?
• Which of such institutions would you expect to react the quickest, perhaps even front running a shift in the bond market, thanks to inside knowledge?

The answer to both questions is the same, I suspect. That would include the world's half dozen largest banks.

It is not in the interest of these banks to keep the current policies in place in perpetuity. Rather it is in their interest to choose the time and place of the next change in those policies, so that they can front run the shifting market. If change must come, and come it must, then it is best if you can control the timing and nature of that change to your advantage.

The allegiances of the Fed and of the world's largest banks are not identical. Under sufficient duress, they will go their separate ways.

Nor is the Fed the mother ship, the final and most powerful arbiter of the outcome. Rather the wealthy families and institutions who own the Fed and control it behind the scenes may well, and likely will in my opinion, take the Fed down a couple of notches at some point, as part of an attempted move to a more global monetary system.

Think about it. If the U.S. Dollar does not stand for the next century as the world's sole reserve currency, then neither does the U.S. Federal Reserve stand for that time as the world's most powerful central bank.

The present bubble in the Fed's dominant role and massive balance sheet will burst, like all good bubbles.

[bpr]

Re: BofA is Collapsing

Seems like old news. Was there something new in here that I missed? It seems that this has been the case since (the feds orchestrated) the takeovers of BS, WaMu, and Countrywide.

Is it just that homeowner bankruptcies and foreclosures are accelerating and we are reaching terminal velocity?

[Slimprofits]

Re: BofA is Collapsing

http://www.thestreet.com/story/10866...ng-report.html

The Times says several hundred jobs in the investment banking unit will be trimmed this week. The newspaper cited interviews with several employees.

Bank of America posted second-quarter trading revenue that, according to a Sandler O'Neill report in July, "were well below our already reduced estimates." The 55% sequential decline in investment bank trading revenue compared to declines of 36% at Citigroup(C_) and JPMorgan Chase(BAC), the Sandler report stated.

But Bank of America executives aren't only ones bracing for bad news, according to the Fox report. It also states that Morgan Stanley(MS_) senior executives have been warned they can expect bonuses that are "sharply lower" from last year. New CEO James Gorman has already vowed publicly to reign in pay at the bank, that was higher than most peers last year by certain measures. A Morgan Stanley spokesman had no comment.

Gasparino also writes that Goldman Sachs (GS_) bonuses could drop 10% from last year. Goldman spokesmen did not immediately respond to an email message.

http://www.americanbanker.com/issues..._091710_092010

In the second quarter the delinquency rate on second liens with combined loan-to-value ratios above 100 was just 6% for B of A, and 5.04% for Wells.

Citigroup's overall delinquency rate was 2.4% in the second quarter and 47% of its second liens were “underwater,” with loan-to-value ratios above 100% in the quarter. JPMorgan Chase did not break out delinquency data on second liens apart from Cavanagh's remarks.

Bank of America, which has $40.6 billion of second liens with loan-to-value ratios above 100%, estimated in its second-quarter report that it would be able to collect 85 cents for every dollar loaned, even if all such loans defaulted. It based this estimate on current housing market prices, a spokesman, Jerry Dubrowski, said.

http://www.bloomberg.com/news/2010-0...urers-say.html

Bank of America Corp., the biggest U.S. lender by assets, should repurchase as much as $20 billion in home loans that were based on wrong or missing information, said a trade group for bond insurers.

More than half of the soured home-equity credit lines and residential mortgages created from 2005 through 2007 that insurers examined should be bought back, the Association of Financial Guaranty Insurers said in a Sept. 2 letter to Bank of America Chief Executive Officer Brian T. Moynihan. Ambac Financial Group Inc. and Assured Guaranty Ltd. are members, and the group said repurchases may total $10 billion to $20 billion.

[..]

Banks manage to repel about half of the buyback claims they receive by showing they’re invalid, according to Moshe Orenbuch, the Credit Suisse analyst who tabulated the bank’s losses from 2008 through the second quarter of this year. The banks probably have adequate reserves, Orenbuch said in his report last month.

It’s unlikely that “a valid defect exists for every loan repurchase request,” Bank of America said in its second-quarter regulatory filing. Even if claims are valid, losses probably would be less than the full value of the loans because the underlying real estate acts as collateral, the filing said.

“The resolution mechanism for disputes with the private insurers is a lot less developed” than with Fannie Mae and Freddie Mac, said Chris Kotowski, an analyst at Oppenheimer & Co. “There is a team of highly paid lawyers on all ends of this correspondence doing the kind of jousting that they do, hoping to draw the opponent into some legal faux pas.”

[Chris Coles]

Re: BofA is Collapsing

They need a solution that both supports the bank balance sheets and at the same time, creates new jobs in the private sector...... http://www.itulip.com/forums/showthr...ector-recovery