Why Is Obama NOT Listening?

Bank of America is about to transfer trillions of toxic derivative dollars onto the Fed. Hasn't this White House learned anything after the AIG rip-off? Have we not had enough of credit default swaps being covered by the taxpayers creating a national security risk.

BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit

By Bob Ivry, Hugh Son and Christine Harper - Oct 18, 2011

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

Accommodating Clients

Jerry Dubrowski, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment on the transfers or the firm’s discussions with regulators. The company “continues to accommodate the needs of our clients through each of our multiple trading entities, including Bank of America NA,” he said in an e-mailed statement, referring to the company’s deposit-taking unit.

Barbara Hagenbaugh, a Fed spokeswoman, said she couldn’t discuss supervision of specific institutions. Greg Hernandez, an FDIC spokesman, declined to comment.

Bank of America posted a $6.2 billion third-quarter profit today, compared with a loss of $7.3 billion a year earlier, as credit quality improved and the firm booked one-time accounting gains. The lender rose 7.3 percent to $6.47 at 1:54 p.m. in New York trading, making it the day’s best performer in the Dow Jones Industrial Average. Credit-default swaps on Bank of America eased 10 basis points to a mid-price of 380 as of 11:49 a.m. in New York, according to broker Phoenix Partners Group.

Moody’s Investors Service downgraded Bank of America’s long-term credit ratings Sept. 21, cutting both the holding company and the retail bank two notches apiece. The holding company fell to Baa1, the third-lowest investment-grade rank, from A2, while the retail bank declined to A2 from Aa3.

Moody’s Downgrade

The Moody’s downgrade spurred some of Merrill’s partners to ask that contracts be moved to the retail unit, which has a higher credit rating, according to people familiar with the transactions. Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody’s decision, said a person familiar with the matter.

Bank of America estimated in an August regulatory filing that a two-level downgrade by all ratings companies would have required that it post $3.3 billion in additional collateral and termination payments, based on over-the-counter derivatives and other trading agreements as of June 30. The figure doesn’t include possible collateral payments due to “variable interest entities,” which the firm is evaluating, it said in the filing.

Dubrowski declined to comment on collateral or termination payments after the downgrade.

‘Be Prepared’

Bank of America’s rating is now four grades below the one Moody’s assigned to JPMorgan Chase & Co. (JPM), the biggest U.S. bank by deposits at midyear, and a level below the rating given to Citigroup Inc. (C), the third-biggest. Bank of America is the only U.S. lender that lacks a rating of A3 or higher among the five firms listed by the Office of the Comptroller of the Currency as having the biggest derivatives books.

“We had worked very hard over the course of the last nine months to be prepared to the extent that we did receive a downgrade, and feel very good about the way that we’ve minimized the potential impact” Bank of America Chief Financial Officer Bruce Thompson said in a conference call today with analysts. “Since the downgrade, we have not seen any change in our global excess liquidity sources.”

Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates.

Dodd-Frank Rules

Keeping such deals separate from FDIC-insured savings has been a cornerstone of U.S. regulation for decades, including last year’s Dodd-Frank overhaul of Wall Street regulation.

The legislation gave the FDIC, which liquidates failing banks, expanded powers to dismantle large financial institutions in danger of failing. The agency can borrow from the Treasury Department to finance the biggest lenders’ operations to stem bank runs. It’s required to recoup taxpayer money used during the resolution process through fees on the largest firms.

Bank of America benefited from two injections of U.S. bailout funds during the financial crisis. The first, in 2008, included $15 billion for the bank and $10 billion for Merrill, which the bank had agreed to buy. The second round of $20 billion came in January 2009 after Merrill’s losses in its final quarter as an independent firm surpassed $15 billion, raising doubts about the bank’s stability if the takeover proceeded. The U.S. also offered to guarantee $118 billion of assets held by the combined company, mostly at Merrill. The company repaid federal bailout funds in 2009 with interest.

‘The Normal Course’

Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

The moves by Bank of America are part of “the normal course of dealings that we’ve had with counterparties since Merrill Lynch and BofA came together,” Thompson said today.

‘Created a Firewall’

Moving derivatives contracts between units of a bank holding company is limited under Section 23A of the Federal Reserve Act, which is designed to prevent a lender’s affiliates from benefiting from its federal subsidy and to protect the bank from excessive risk originating at the non-bank affiliate, said Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill School of Law.

“Congress doesn’t want a bank’s FDIC insurance and access to the Fed discount window to somehow benefit an affiliate, so they created a firewall,” Omarova said. The discount window has been open to banks as the lender of last resort since 1914.

As a general rule, as long as transactions involve high- quality assets and don’t exceed certain quantitative limitations, they should be allowed under the Federal Reserve Act, Omarova said.

In 2009, the Fed granted Section 23A exemptions to the banking arms of Ally Financial Inc., HSBC Holdings Plc, Fifth Third Bancorp, ING Groep NV, General Electric Co., Northern Trust Corp., CIT Group Inc., Morgan Stanley and Goldman Sachs Group Inc., among others, according to letters posted on the Fed’s website.

The central bank terminated exemptions last year for retail-banking units of JPMorgan, Citigroup, Barclays Plc, Royal Bank of Scotland Plc and Deutsche Bank AG. The Fed also ended an exemption for Bank of America in March 2010 and in September of that year approved a new one.

Section 23A “is among the most important tools that U.S. bank regulators have to protect the safety and soundness of U.S. banks,” Scott Alvarez, the Fed’s general counsel, told Congress in March 2008.

To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net; Christine Harper in New York atcharper@bloomberg.net.

To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net; David Scheer at dscheer@bloomberg.net.

Max Keiser speaks about the situation the banks are in.

"This week Max Keiser and co-host, Stacy Herbert, talk about the European penny drops as more banks need more bailouts while the public debt clock ticks up to $40 trillion. In the second half of the show, Max Keiser interviews Michael Betancourt about the threat that Occupy Wall Street presents to our modern form of capitalism that relies on ignorance and passivity in the population in order to operate schemes of fraud and bubbles."

Dylan Ratigan Explains the Goldman Sachs Fraud Scheme

Visit msnbc.com for breaking news, world news, and news about the economy

Newt Gingrich: Frog-Lizard Man and the Stone Age Party Agenda

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President Obama's Jobless and Stagnant Wage Recovery Plan

President Obama gave a speech today in Elkhart, Indiana a community hit hard by the economic collapse. He gave his typical feel-good pep talk about how the economy will come back if we do our part. His part is to give the truck company, Navistar International Corporation, the site of his speech $39 million to build a hybrid heavy duty cross-country hauler.

I am sorry Mr. President, what is needed is not $39 million, but $39 billion to stimulate competition among the truck manufacturers to develop a variety of hybrid models. Not just one!

You allowed AIG to receive $13 billion in bailout funding. $26 million went to pay off counterparty debt to Goldman Sachs and other banks, yet all you are willing to do for an industry invested in the real economy, in Green jobs, in supporting a community, is to offer them a measly $39 million. You should be embarrassed to show your face in that town.

You, Mr. President, have sold out to the financial investment banking industry, or what might be called the ‘paper capitalists’ embedded in the Wall Street financial bank robbery and crime syndicate operations.

Outside of Elkhart, approximately 10 miles, is Wakarusa. In that town is Electric Motors Corporation. They are planning to use an empty plant building in a partnership project with the Nappanee, Indiana-based Gulf Stream Coach, to develop an electric vehicle. They are hoping to receive some stimulus funding from the government to move forward. They don’t have it yet.

Again, Goldman Sachs has already received $26 billion in bailout money, but the Electric Motors Company wanting to build a real object to sell in the world market has to hope for funding. What has Goldman Sachs done with their bailout money? They have given huge bonuses and engaged in Wall Street market timing stock investing with taxpayer dollars. This is what Mr. Obama has been doing for America.

Here is the transcript of President Obama’s Elkhart speech.

Nowhere in his speech given to a group of hardworking Americans as listened intently to his message did he call for justice by pursuing an investigation of the financial-banking industry responsible for the collapse of the Elkhart way of life and economy, which includes the very jobs lost in the heartland of America. Nowhere in his speech did he demand justice in the form of major investment banking reform legislation. Nowhere in his speech did he say that transparency and accountability must be the new business-as-usual for Wall Street. Nowhere in his speech did he demand that the Federal Reserve be audited and made to bring forth documents outlining where the money has gone, to whom it went, how much was given out, and what the currency exchanges, warrants, and liquidity swaps are all worth today. Nowhere in his speech did he say that the workers of America should not have to pay the heaviest price resulting from this collapse. Nowhere did he say that those who facilitated this collapse with their corrupt and irresponsible business practices, as well as their intent to commit criminal acts would pay the heaviest price.

It is clear that what President Obama did in Elkhart was to play it safe, take the middle road, the road most traveled by politicians.

The investment banking industry has been promised, pledged and given $12 trillion, which is equal to what the GDP of this nation is in one year’s time. Yet, he had said that in his stimulus package: $500 billion per year for two years is what the real economy will get in order to remake this nation. Who is he fooling? Navistar will get $39 million to design, fabricate and manufacture a heavy duty hybrid truck. Yet, the nation’s working class will likely see 50% of all homeowners by 2012 underwater with their mortgages.

A hybrid truck is what the real economy got this week.

But, what we did see has been Wall Street banks showing large profits and improved balance sheets because, more than likely, Ben Bernanke injected these banks with taxpayer dollars, to the tune of over $2.3 trillion so they could manipulate the market by using very high speed computer-timed and engineered casino-like trades for the sole purpose of jacking up stock prices in order to make lots of money for themselves.

What Tyler Durden, of zerohedge.com, has discovered is that less than $400 billion in money market funds were taken out, since March 2009, to invest in the stock market. He asked then, where did the $2.3T come from, since it did not come from money market accounts? It did not come from working class expendable wages? Nor did it come from savings accounts, since people depositing in savings accounts are looking for no-risk protection right now. Since the cash was really not coming from $2.3 trillion in withdrawals from money market accounts, it more than likely came from Federal Reserve chairman Ben Bernanke manipulating the stock market in order to boost the balance sheets of the biggest financial investment banks, those responsible for the collapse in the first place, so they, once again, can return to becoming cash cows; although, businesses on Main Street and Side Street continue to find it very hard to borrow in order to keep their businesses afloat. Credit continues to be locked up because the investment banks feel that it is too much of a risk to lend.

But Elkhart, Indiana gets cash for a hybrid heavy duty truck. That is only fair, right Barack? Throw a Green bone to the masses while the rich get fat and happy.

So, is only Matt Taibbi, Elliot Spitzer and a few others the only one’s calling this Federal Reserve, Treasury and the investment banks a triangle composed of the nation’s biggest economic crime syndicate in the history of the country?

Mr. President, shouldn’t YOU be calling this out as a crime syndicate, as well? But, YOU Mr. President have embraced the Wall Street financial crime syndicate foot soldiers by allowing them to assist you in the development of economic policy.

What is being hypothesized as the reason Bernanke has embedded himself in this swindle would be to fill up the investment banks with taxpayer cash so they can mop up the U.S. Treasuries that foreign central banks are likely to dump on the world market. Bada Bing Bernanke will be playing disaster clean-up man hoping he can catch these Treasuries before they get sold off at rock bottom prices ultimately driving down the value of the dollar.

The other reason for the engineered stock market rally is to give the illusion that the economy is in recovery and that working class Americans can now, once again, resume their consumer spending practices, and charge up their credit cards. Remember, credit is how the wealth of this country is measured.

But no one is talking about how close AIG is to falling off the precipice and into the bankruptcy pit in spite of their good news profits made the same way that Goldman Sachs does it, which is not the good old fashion way of doing business—earning it. It is all about high speed computer timed trades jacking up stock price values. They appear to be engaged in a shell game because they don’t have enough cash to cover their debt losses. Again, mum is the word regarding all the explosive credit default swaps sitting heavily on the balance sheets of the investment banks. In addition, Bank of America and the other credit card companies are writing down huge losses in credit card defaults.

To further point out the toxic tentacles of the investment financial banking crime syndicate, one has to read Pam Marten’s latest article titled “Millions of Americans Pushed Into No-Law System by Colluding Banks”, found on Counterpunch.org (8-3-09). She wrote about how Wall Street has fabricated their own private justice system through setting up a rigged kangaroo like court to handle the way employee disputes are dealt with. Employees with complaints have been allowed only one recourse option, and that is through “arbitration”. The process of arbitration is “where the financial elite make their own laws and run their own private justice system to carry out those laws.”

What has been unearthed through the courts is that one of the arbitration services that was supposed to be impartial and fair in dealing with issues brought up by employees working for Wall Street corporations was owned by a financial banking institution.

Here is another example solidifying that there is a financial crime syndicate at work. “Documents [show] that the private justice system used by the biggest banks in the country [had] been rigged in hundreds of thousands of cases. Next, evidence surfaces that conclusively shows that the general counsels of these very same banks have huddled together in one room to draft a uniform mandatory arbitration clause banning class action lawsuits in their credit card contracts and shared strategies on its implementation effectively locking the courthouse doors to every credit card holder in America.”

The article went on to say that the U.S. Court of Appeals for the Second Circuit, on 4-25-08, charged collusion between Bank of America, Capital One, JPMorgan Chase, Citigroup, HSBC Finance Corporation, MBNA, Providian Financial Corporation, and American Express. Many of these corporations, which had been bailed out by the taxpayers, were, at the same time, tightening the screws on them.

This entire arbitration charade was rigged because the financial banking and lending institutions hired on judges and lawyers who had worked in the public court system and appeared to many to have favored them. They lured them away from the public sector and into their various arbitration associations and service entities paying them lucrative salaries to represent their interests. One such association, The American Arbitration Association (AAA) engaged in an “incestuous relationship with corporate America.”

Ms. Marten’s article is a real eye-opener! It clearly shows that the investment-financial-lending banking institutions were rigging the judicial system in their favor without much of a problem. Even Janet Reno, when attorney general under President Bill Clinton, appeared to have ignored the request for an investigation into AAA, which failed to disclose “a financial conflict of interest” with a corporation it had been financially aligned with even though they were providing arbitration services for them.

Eight months later, Janet Reno went off and “was elected to the board of directors of the American Arbitration Association.” Do you feel you need to take a bath yet?

When will President Obama, Attorney General Eric Holder, Congress and the American people become outraged over the fraud these financial investment banking institutions have been engaged in? The incestuous relationship between Ben Bernanke, Tim Geithner and the very institutions that took down the U.S. economy is nothing more than a bunch of dirty, filthy financial crime syndicate operators. The RICO statute needs to be implemented. The Sherman Anti-Trust Law needs be dusted off. It is not enough to just have the newly appointed Financial Crisis Inquiry Commission look into this crime syndicate.

If President Obama is to regain the trust of his supporters, which he is quickly losing, and the nation as a whole, he must move forward with the intent to punish, as well as to shut down this massive and invasive financial parasite that is sucking the life out of the economy of which it is using to sustain only itself and its interests.

President Obama has been filling the toxic soil of the largest investment banks with lots of fertilizers giving them much green but without meaningful results, while without the soil replenishers they would have died because the soil is filled with poison. Instead, what is needed is to fertilize the already enriched soils of the real economy where a field of green and blooms would deliver an immediate solution throughout the country. A few million for a truck company is just not enough, Mr. President. You have been doing it wrong.

thanks for reading, jerry

P.S. Top cities losing home values: Case-Shiller Indices.

President Obama Has Been Swarmed By The Huge Financial Beehives

I heard a story from a gas company technician about a massive hive of bees that swarmed him. He was standing still when he saw a queen bee leave what he assumed was a meadow hive leading a giant swarm of bees numbering in the thousands. He said it was a huge black cloud of bees that weaved all around as it approached him. The giant swarm came toward him, encircled him, and then, led by the queen, took off into the distance.

This is what has been happening to the average person in the United States. Since Reagan, the financial beehives have been building their worker bee populations in order to go out upon the planet seeking grains of pollen. The pollen consists of the people’s financial wealth.

We have seen a Goldman Sachs beehive, as well as a CITI hive, a BoA hive, and the list goes on. Instead of just a localized, unassuming tree hanging hive, they built fortress hives. The chair queens not only had worker bees, but operative bees that trained the busy little worker drones in the process of finding grains of pollen from the most barren and questionable sources, as well as from the common and plentiful sources.

The worker bees were shown that pollen could be discovered in the open market fields where there could be found a plethora of blooming wealth of flowering capital sources ready for the picking. And, there was nothing to stand in their way.

The worker bees also found usable flowering capital under many rocks and stones, of which they overturned to pluck for the taking.

The chair queens created a syndicate. They would meet together in secret plotting and developing ways to take the pollen grains and brew securitized and “derivativized” nectar formulas to feed all the worker bees motivating them to gather up more and more pollen grains. They were even encouraged to keep a portion of the nectar brew to sell or use for themselves.

The leader of all the land, which had been picked by the leading chair queens, began getting supplied with all the nectar he could get away with. This would ensure the control by the chair queens over the pollen gathering processes. This man was President Obama. The leading and most powerful chair queen was one who ran the Goldman Sachs hive. This chair queen told President Obama that he would be bringing key GS hive operators into his command and control center. The list of key operator bees was numerous. They were instrumental in training operators that swarmed the congress of the land, as well as many other agencies, facilities, and companies.

The goal of all these operators was to make sure that even the pollen stored inside the Treasury of Pollen would end up in the various hives, but mostly in the deep storage module vaults of the GS hive, AIG hive and the CITI hive.

The danger that occurred was that President Obama had placed in charge of the people’s Treasury of Pollen a key GS hive operator. This operator, a high level worker bee, had a fellow pollen-syndicate operator in charge of the Federal Reserve of Pollen Grains. He devised a technique that took a grain of pollen and repeatedly split it into numerous grains diluting the original value of that grain but which still could be made into nectar, although watered down in many respects. Therefore, it no longer had the same potency and “nutritional value” when used requiring more to supply the typical daily requirements of nectar.

The people, who worked hard to plant the seeds, toiled the land using their bodies and minds to cultivate the plants and crops that provided the blossoms and flowers, and ultimately, the seeds that produced the pollen, which the worker bees took at will. There were no rules or regulations set upon the worker bees because if the people’s representatives did not play the game the way the chair queens wanted it played, then they would be attacked by the swarm with repeated stings removing them as an adversary to their greed-based objectives.

After decades of the people laboring over their fields of flowering plants and crops, the worker bees took so much pollen so quickly that the plants could not pollinate each other because the pollen was not being used to propagate the land with new and improved crops and plants, but to steal the pollen to produce nectar inside the hives. In other words, the chair queens and operators wanted all the pollen grains for themselves.

This resulted in fewer crops and plants to find pollen grains. The hives had to lay-off worker bees, and the field hands no longer were able to grow as many crops and plants for the purpose of producing seeds for the following planting season. The overall economy of the land fell into collapse. In the past, the people had lots of fruits, flowers, beans, nuts, seeds, and grains to keep the economy thriving. It thrived too much and the nectar brew began to overheat. The process of splitting the pollen grains to produce the diluted “nectarized” securities and derivative formulas ended up causing a great fire from an unregulated fermentation process destroying all that had been stored and saved.

The frightened chair queens ended up going to the Federal Reserve of Pollen Grains and President Obama’s key chair queen operative inside the Treasury of Pollen demanding they turn over all their stored grains to them, otherwise the hives will self-destruct and disappear leaving only the small beehives hanging throughout the fields, valleys, mountains and villages. The chair queens painted a bleak and grim future if they were not in control of the pollen grains.

The disappearance of the giant hives would have been good in the long run because the local people would have a more sustainable relationship with the bees, the crops and plants. The chair queens were afraid of this occurring removing them from the wealth-gathering process of stealing pollen grains from the people.

The sustainable scenario did not happen. The chair queens won out because President Obama favored them over the needs and survival of the people. What would be needed is for President Obama to authorize his command center to go out and use a potent and effective, as well as long lasting, bug defogger on all the massive hives that had caused the collapse in the first place!

The sequel has yet to be made. Stay tuned.

thanks for reading, jerry