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View Diary: A Do-Over for Bank of America, Again? (68 comments)

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  •  Yes, they are. (8+ / 0-)

    There's enough money in BoA to pay off the insured depositors easily, and all of the depositors most likely.

    It's the bond holders, stockholders, derivatives counterparties, etc. etc. etc. who can't be made whole.  The whole extend-and-pretend scheme is designed to make sure the bondholders etc. don't take a hit.  In the end this will be worse for the depositors as by the time it actually goes down the other lenders may have looted enough that there isn't enough for the depositors.

    Read pp. 1-7 of Krugman's _The Great Unraveling_ (available from Google Books). NOW.

    by neroden on Sat Aug 27, 2011 at 10:28:10 AM PDT

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    •  The FDIC would have to bite the bullet, (0+ / 0-)

      at least for awhile.  Remember that banks make money by asset / liability mismatches: short liabilities, long assets.  As long as their liquid assets are less then their short term liabilities (and they're way, way, way smaller), the FDIC will have to bite the bullet and pay up.

    •  What is your source? (0+ / 0-)

      Total deposits are about $4T, according to this
      http://www.wikinvest.com/..._(BAC)/Data/Bank_Total_Deposits

      You're saying that they "easily" have $4T in not only good assets, but assets that would continue to remain good in the event of a BoA bankruptcy? I would like to see a source for this.

      Even if what you write is true, Lehman Bros. had no deposits, and its collapse caused a major negative shock to the economy. If the same thing happened here it wouldn't be good to a lot of people.

      "It is, it seems, politically impossible to organize expenditure on the scale necessary to prove my case -- except in war conditions."--JM Keynes, 1940

      by randomfacts on Sat Aug 27, 2011 at 06:12:53 PM PDT

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      •  I'm looking at the 10Q now, and deposits (0+ / 0-)

        are 1T.  W/ 400B of reasonably liquid assets, upfront cost to the FDIC is 600B (and then they'd recoup some part of it through auctioning the loans and other assets)

        •  Perhaps BofA should be nationalized (2+ / 0-)
          Recommended by:
          catmanhunting, Cliss

          Along with Citigroup. Then certain bondholders can be forced to bite the bullet.

          "It is, it seems, politically impossible to organize expenditure on the scale necessary to prove my case -- except in war conditions."--JM Keynes, 1940

          by randomfacts on Sat Aug 27, 2011 at 06:30:53 PM PDT

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