Mish has a teardown of the latest outrage of Bank of America. It seems BoA’s counterparties are uncomfortable with BoA’s derivatives position and/or equity and would like either more collateral (yeah, right?) or else move the risk to the division which owns the retail banking and deposits from the public.
Moral Hazard: 1
But then Mish goes all non-sequitor. End all fractional reserve lending! This is like when there is a discussion of balancing the federal budget, and a “conservative” all of sudden interjects. “Let’s have a Constitutional Amendment to ban gay marriage!”
Whiskey. Tango. Foxtrot. Mish!
The problem here is clear:
1) Moral hazard,
2) National corporatism,
3) Insane derivatives growth …
4) … Which is itself a product of the Fed and its irredeemable paper currency,
5) Special franchises and subsidies for banks not available to anyone else
Fractional Reserve Banking has nothing to do with this.