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Friday, January 16, 2009

Economy Too Big to Fail; Too Incompetent to Succeed

Posted by Jonathan Golob on Fri, Jan 16, 2009 at 11:04 AM

Bank of America, to where some of you fled upon WaMu's collapse this Fall, is suffering from a little indigestion after devouring hideous-debt-laden Merrill Lynch & Co as well as irresponsible Mortgage lender Countrywide.

Bank of America Corp., the largest U.S. bank by assets, slid 15 percent in New York trading after posting its first loss since 1991 and receiving emergency government funds to ease the acquisition of Merrill Lynch & Co.

...

The losses, coupled with the U.S. lifeline of $138 billion, put more pressure on Chief Executive Officer Kenneth D. Lewis to make the takeovers of Merrill and mortgage lender Countrywide Financial Corp. pay off. Lewis has drawn criticism from analysts for rescuing the two ailing companies, and the bank told investors on a conference call today to expect more and possibly bigger losses in the quarters ahead.

How much more help are we, the taxpayers, granting Bank of America? Twenty billion dollars directly handed to them, plus the guaranteeing of nearly $120 billion in additional loans.

The plan to graft failing, and possibly unsalvageable, financial organizations onto 'strong' retail banks? Going swimmingly so far, isn't it?

Don't even get me started on the even more massive and flailing resuscitation attempts on Citigroup.

Comments (15) RSS

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Meanwhile, my tiny little bank that's been in business since before the Depression just keeps right on trucking along. I am account number 25,000-and-change, and I haven't been asked for I'd to cash a check since I opened the account. Big isn't always better.

Posted by Fifty-Two-Eighty on January 16, 2009 at 11:46 AM

How could BoA lose money after extracting its customers' money so persistently? I left after they spontaneously upgraded my free checking (free human contact promised twice per month but a fee was always charged) to checking with a monthly fee.

Posted by Amelia on January 16, 2009 at 12:04 PM

Amelia's right.

(caveat - I own 400 shares of BofA)

Posted by Will in Seattle on January 16, 2009 at 12:09 PM

You'd think they could steer $10 million of that bailout money my way; they wouldn't even notice.

C'mon Neel, pay me off!

Posted by Original Andrew on January 16, 2009 at 12:09 PM

Bank of America gave me my student loans. If they go bankrupt, would I still have to pay them back?

If not... then please, please, please go bankrupt!

Posted by Urgutha Forka on January 16, 2009 at 12:17 PM

How aggravating. Our money is being used as piss to the wind. More and more I'm reading some serious people suggesting temporary nationalization of all banks. Apply the new FASB standards, reveal bank insolvencies right away, force recapitalizations/mergers/bankruptcies, replace all the execs and owners. With an eye to attracting confidence of debt buyers sufficient to finance a $2 trillion stimulus to be devised at that point. Confidence bolstered by Congressional investigation into meltdown causes. Then set the healthy remaining banks free to romp around again, under closer supervision this time.

I don't know the right thing to do, but it's impressive to me how many longtime econ wonks are starting to push for this.

Posted by tomasyalba on January 16, 2009 at 12:37 PM

All the more reason to bank at Credit Unions. =)

Posted by Dingo Rossi on January 16, 2009 at 12:47 PM

Isn't BofA a commercial bank and not a retail bank?

Either way, I have never wanted those fucks to have my money.

Hello Europe.

Posted by Yes or Affirmative on January 16, 2009 at 1:05 PM

You are a transparent fraud. You know as much about finance as you do about climate change.

Posted by Science Rules on January 16, 2009 at 1:07 PM

@5,

Someone will buy that debt for pennies on the dollar, but you'll still be on the hook for all of it. Sorry.

Posted by keshmeshi on January 16, 2009 at 1:08 PM

Boodogle! I said it before and I'll say it again. Boondogle!

Posted by Vince on January 16, 2009 at 2:34 PM

@7 for the insightful win.

Posted by Will in Seattle on January 16, 2009 at 2:40 PM

Shouldn't "too big to fail" also mean "too big to exist"? Why were these companies allowed to get this big, powerful and, allegedly, indispensable - it's time to start breaking them up. Also, if mergers mean loss of jobs then breaking these companies up should mean more people hired - another benefit. Our fucking congress - asleep at the wheel again.

Posted by brihi on January 16, 2009 at 3:57 PM

What? Fled to BoA instead of BECU? Sad. I used to be with BoA, they were my first, bank. I didn't know that institutions showed thanks for banking with them till I had strong reason to switch. Basically lied to twice by bank managers, after a deposit made in person was lost and I incurred over draft fees due to them selling me a money order for rent during that same transaction and them think I should just sit tight while my money was tied up in fees during Christmas. They mess up while trying to fix this problem leaving me with no money for groceries. They first assumed 'our hands are tied' would sit fine with me and I wouldn't expect them to be dynamic enough to prevent their fuck up from affecting a patron with a PERFECT banking record. (they caused my first overdraft)

Posted by jen on January 16, 2009 at 7:25 PM

So...is it legal for all these failing banks to up my interest rates for no apparent reason other than they are failing? My WaMu credit card just skyrocketed from 10% to 28% (and my credit limit was reduced--conveniently--to the exact balance I currently owe). Citibank just upped me from 10% to 17%. I have an "excellent" credit rating.

Posted by threnody on January 16, 2009 at 10:48 PM