The Talking Dog

October 24, 2011, Deja vu all over again

With apologies for the post title to national treasure Yogi Berra, those interested in the specific mechanics of what might well be this year's world financial meltdown might want to take the time to read this lengthy Zero Hedge piece by Reggie Middleton on the coming collapse [and inevitable bailout!] of Too Biggest of them All to Fail, Bank of America, and its, you know, larger effects.

I'll just clue you in a bit... Reggie points out a little known change made to the bankrupcty law in 2005 [the better known change, of course, screwed individual debtors by making it harder for them to file bankruptcy... for the benefit of... guess who? Why... Delaware based MBNA-- thanks Joe Biden! MBNA, of course, is now... Bank of America!!!] This provision exempts derivative holders from the messy "cents on the dollar" recoveries of mere mortals and allows them to jump to the head of the line-- ahead of even INSURED DEPOSITORS! Yes... even Tea Party members would have to vote for THESE BAILOUTS, lest they ensure the bank runs to end all bank runs...

Mechanically, the Federal Reserve is favoring transfer of those ultimate weapons of financial mass destruction, in the form of various derivatives, from the balance sheet of Bank of America's investment bank divisions (like Merrill Lynch) over to its FDIC insured depositor banking divisions! Once again, the idea is to benefit "counter-parties" [maybe Goldman Sachs, if I had to bet, and probably some European banks] at the expense of depositors [a/k/a "the taxpayers"].

When you put exactly the same maniacs who oversaw the systemic meltdown in 2008 in charge "because it's just so darned complicated that no one else even understands it" [thanks Barack Obama!]... it's not surprising that they play according to the only playbook they know how to use... and the system melts down again... in exactly the same way. Not only were derivatives not outlawed (I suggested making them a death penalty offense)... they are now bigger than ever, and even more primed to destroy the rest of the planetary financial system.

Yee Ha.

George W. Bush... Barack Obama... does it really matter?