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
Yesterday DoctoRx and I were discussing his banking problems with BofA. As you may have heard, their web site had been down since last Friday. The Doc reports that he couldn’t get in to do any online banking. He went to the branch office and was told they couldn’t [...]
Readers who followed me at my original blog, Econblogreview, may recall that about a year and a half ago, I was harping on the relative weakness of the banking stocks as a harbinger of a new economic and stock market downturn. Certainly I have been vociferous about that in these months at The Daily Capitalist. [...]
One of the problem with a leveraged economy is that some good credits turn into questionable or poor ones if the economy turns down suddenly. This is where I think the Western world is now. Thus even modest changes in economic conditions produce leveraged effects when bank solvency is in question.
The Economic Cycle Research Institute’s Weekly [...]
I’ll bet that this statement is something that BofA and Ken Lewis regrets mightily (press release from January 11, 2008):
Bank of America Corporation today announced a definitive agreement to purchase Countrywide Financial Corp. in an all-stock transaction worth approximately $4 billion.
The purchase will make Bank of America the nation’s [...]
Mish has a post up involving a discussion with a Cerdian economist named Ed Leamer. I am going to comment on one point:
Leamer: Dips come from collective postponement of the postponable purchases: homes, cars and equipment. But all three of these are at record lows relative to GDP after all the postponement that has [...]