It's real money, especially since "Bank of America Deathwatch" financial pundits have multiplied on the web and it has become a bit of a geek guessing game. When will BoA finally tank? And when it tanks, the question becomes, who will walk away with all their money, and who will be left holding the bag? The deal just snuck through with the Federal Reserve's, and implicitly, Congress's approval insures Wall Street casino gambler's debts by moving them into accounts meant for penny-pinching grandmas.
Citing Bloomberg, financial commentator Avery Goodman tells us:
"Even if we net out the notional value of the derivatives involved, down to the net potential obligation, the amount is so large that the United States could not hope to pay it off without a major dollar devaluation, if a major contingency actually occurred and a large part of the derivatives were triggered."
A bailout for one company's most irresponsible investors triggering a major dollar devaluation? This is the kind of thing that starts revolutions.
"Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion."
Without going too far into bewildering financial jargon, it's like this: Your wildest son is asking you to co-sign for a debt. If he can't make his payments, you are on the hook. How much is the debt? He doesn't know. Just sign on the dotted line.
Meanwhile the "super committee" is looking for a trillion or so dollars in hits to everything, including Social Security and Medicare/Medicaid, to keep the budget from going any more out of whack. It's urgent, they say, for us to stop spending like drunken sailors. But at the same time they just whipped out a pen and signed for junior, crossing their fingers that something won't happen which is almost inevitable.
Where did I stumble across this news item? Sure as heck not on MSM, which is focused on the smoke grenade of BoAs recent $400 million fee case settlement. $400 million fits into $72 trillion almost 2 million times. Now which is the bigger story?
I stumbled across it posted by an outraged Occupy Wall Street-type on one of their Facebooks. You don't need to read Karl Marx to become an Occupy Wall Streeter. The American financial pages will do it.
It is unlikely the taxpayer's hit will be as much as $72 trillion. Again, no one knows. But it will be a chunk of money.
BusinessWeek writers Phil Mattingly and Bob Ivry point out that Dodd-Frank is not strong enough to prevent the BoA move:
"Separating complex transactions from FDIC-insured savings has been a cornerstone of U.S. regulation for decades, including Dodd-Frank, the regulatory overhaul enacted last year. Bank of America's transfer prompted some lawmakers to push for stronger rules than were included in that sweeping law. Senator Bernie Sanders, a Vermont Independent who supported legislation to separate trading operations from commercial banking, said the transaction is a "perfect example why we should break up too-big-to-fail financial behemoths.""
Representative Maurice Hinchey, a New York Democrat who pushed to require splitting commercial and investment banking, said "What Bank of America is doing is perfectly legal -- and that's the problem."
Hinchey is among more than 40 House lawmakers who have signed on to a bill that would reinstate the Glass-Steagall Act, the Depression-era law that enforced separation of depository institutions from investment operations. Most are Democrats, but that leaves roughly 180 House Democrats who have not signed onto the bill, and at the moment have no intention to. Not to mention the "super committee" eyeing your Social Security.
A commenter in a Columbia Journalism Review piece on the Bloomberg reportage says: