Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval

http://seekingalpha.com/article/301260-bank-of-america-dumps-75-trillion-in-derivatives-on-u-s-taxpayers-with-federal-approval ^

[TigerClaws]

Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

[volunbeer]

“”There is no possibility that the world could cover the losses””

I don’t get this. The world is a closed system.

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Your world and my world is a closed system. We have income, debts, recurring bills, insurance, constant taxes, and assets. It’s straightforward and we all understand it.

I found all of this very confusing and I still don’t claim to completely comprehend it. The layman’s version in my mind is this. The banks and financial markets are operating under a completely different set of rules . The Federal Reserve and other World Monetary Authorities have digitized money. That means there is not a printed dollar or a fixed amount of currency in circulation for every dollar that exists on paper or in a computer (see fractionalized banking below).

See - http://en.wikipedia.org/wiki/Money_supply for the basic definitions. Pay attention to the M2 measurement.

See this thread from two days ago. It sadly only got 24 replies and not much attention but see the graphs on the thread. http://www.freerepublic.com/focus/f-news/2796492/posts

Now consider this - You have 10k in XYZ Bank. XYZ Bank has 40 billion dollars in deposits from individuals and businesses. However, XYZ Bank has “investments”, or in this case derivatives worth 400 billion dollars. They don’t have 400 billion dollars in deposits. They consider their 400 billion dollars in derivatives to be assets. However, it is not a real asset. It’s a bet, just like mortgage backed securities were a bet that the real estate market would keep appreciating and the assets (homes) would be worth more than the loans. In theory, there has to be a winner or a loser. Some bet against and some bet for. It’s all digital money right?

No, your money and mine is real. If the XYZ bank(s) bet wrong on the derivatives and the opposing bank(s) call in the digital note then XYZ bank(s) could collapse. The fantasy casino that has been created in the financial markets does not respect your deposits or mine. If the bank needs 400 billion to remain solvent (i.e.-meet it’s obligations) it is impossible. They don’t have the assets. If they try to leverage the assets they do have - your money and mine - those real deposits could be squandered in the attempt meaning the FDIC has to step in and cover their pledge for our losses and liquidate the bank to other competitors.

However, the Fed nor the U.S. Government has the funds or assets to cover 1/10th of the total pot the banks are gambling with. We already saw the Fed step in to cover the mortgage bets and it brought the world economy to it’s knees. On paper - the mortgage bets were real assets because somewhere there was a piece of real property associated with it. In reality, the mortgage bets were a gamble far beyond the real value of the asset. There are derivatives for everything including the stock market - in plain language, a bet for future earnings and value of an asset of some type. It is impossible for the derivatives on paper to be attached to a real asset that is worth even 10% of the paper bet.

It’s fractional banking taken to it’s logical conclusion and it’s all digital money. See - http://www.creditcrunchcookbook.com/2009/01/26/fractional-reserve-banking-explained/

The catastrophe is that these instruments are measured in dollars.... the same dollar you and I carry in our wallets and use to buy things. If the derivative markets crash (quite possible - even probable some say) the obligations have to be covered. The FDIC just got put on the hook for 75 Trillion dollars of B of A derivatives.... that is you, me, and the U.S. dollar. They would be presented with two choices - collapse the world economy or digitize the money to cover the losses. That is the outrage... the banksters take the profits on their bets and the nation absorbs the losses.

Derivatives are the ultimate bubble and the numbers are absolutely staggering. If anyone who is more educated than me thinks I got it wrong I will not be insulted and hope they straighten me out because it still seems to be a muddy mess.

Lengthy answer to your question and I know the explanation above is simplistic but I hope it helps. It’s not a closed system because the “value” of derivatives has continued to climb in a computer. The value is measured in real currency and when it crashes the paper or digital currency will become worthless.... just like the dollar in your pocket. These real markets between banks and nations seem seperate, but they are a fantasy profiting a few at the expense of the many. It’s not a story that would fit into a 5 minute news segment so it’s beyond our understanding and interest. Unfortunately, as we have recently seen, our politicians, leaders, and bankers will make us eat the losses to keep the system going. At some point the bubble will implode (they always do) and the dollar in your pocket could be fractionalized (massive inflation) and the dollar assets you have in the market and XYZ bank will be fractionalized. The U.S. Government and the EU cannot cover the bets made by banksters and it’s all tied together so if one fails there is mutually assured destruction. Think 10 times (it’s probably much more) the housing bubble and remember our central bank created the money (or borrowed it from our future earnings) to bail out the Bank of England and Deutsche Bank against the losses they suffered betting on our housing bubble.

[gaijin]

If the real cost of WW2 in the 40’s was $5 trillion and we’re on the hook for 200 “trill” total, then that means:

We are now expected to fight FORTY WW2’s.

FORTY WORLD WAR TWO’s.

Not two, or 5, or 10, no. FORTY.

So we’re the new ENGLAND.

[central_va]

We are now expected to fight FORTY WW2’s.

Think about every ship, air craft carrier, tanks, artillery, small arms, ammunition, air craft, radar, rations, uniforms, pay and expenses during WWII then multiply by 40!!!!!!!!!!!!!!!!

[stevie_d_64]

All these equivalencies are giving me a headache...

Does anyone agree with me when I believe ti would be easier to fire 535 congressmembers/senators, 9 supreme court do-nothings, and one executive branch community organizer and just start over???

Ban lobby-ists from the political boundaries of Washington D.C. and local state capitol complexes, never hedge or spend more than the government takes in, ever, under penalty of life in prison...

Just a few things that are going through my conveluted, delusional mind right now...

[Varsity Flight]

Unfortunately, what will stop this is people (NOT govt people, which can insulate by hiking their salaries), will cease from purchases, BECAUSE comodities, like oil will skyrocket (like today), AND because the players in this now have a direct debit WRITE_DOWN into EVERYONE’S financial accounts known as “affORDABLE” (Vampire)-Care.

The effect : Mass unemployment, lack of business incentives, crony regulations.... (manifestations: food stamps, OWS protests, tent cities, massive debt, big time cronyism etc.,)

Notice how none of the picked candidates are addressing this as the no. 1 issue.

[Marine_Uncle]

The banks must be protected. They run the world. The USA is just one convenient place for them to operate from. /sarc.

[lentulusgracchus]

I did a web study on the _value_ of everything in the world; found nothing comprehensive but a reasonable estimate seems to be $1 Quadrillion (1,000 Trillion).

So somehow, money-center and investment banksters found a way to float debt instruments and securities on 20% of absolutely everything that is worth anything on the planet.

How in the hell did they do that? They don't have title!

Then they pocketed fees .... took bonuses .... took capital-gains treatment on their comp packages .... and drove down to the yacht basin in their Lamborghinis, to hoist hook and get underway for Cayman Brac and untouchability.

[lentulusgracchus]

What comes after a “trillion”??? “quadrillion”??? then “pentillion”???

Quadrillion, quintillion, sextillion, septillion, octillion, nonillion, decillion, undecillion, dodecillion, and after that -- it's immaterial here in the real world.

The pari-mutuel function of money-creation (and stock watering) means that these guys cut themselves in for 20% of the world, and everyone else's money is worth that much less.

Or less than that.

What I want to know is, who got the money? Where are they hiding?

[veracious]

My own estimate would be that they have hypothicated more than $1Q. This according to estimates of all derivatives alone running more than 1Q. Some derivatives could be offseting though.

Conceptually, the -Reserve- and I’d assume other fiat bankers in the world can re-leverage without association to a maximum real value. They are re-leveraging their own loans as a system.

[Cvengr]

Another Gazillion dollars to bail out this mess?

[Neidermeyer]

If there were rules they’d be OK ,,,

1.) You must have an insurable interest.
2.) You must have reserves of at least 10% of your gross exposure.
3.) Derivative contracts must be publicly acessible for viewing.

[Neidermeyer]

I don’t think this is about Foreclosures or real estate.

I think is is about the gambling aspect of derivatives.

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The real estate was necessary to lure in the rubes who thought they were buying a piece of a security based on something both real and secure ... The investors were necessary to create the CDO's/CMO's/Certificates etc. so that there was a ready known source of securities that Wall Street knew and controlled the quality of ... you create crapola (create huge fee income) , you bet against it ... result immense profits .. ,, foreclose on the properties that you bought with investors money AND KEEP THE SALES PRICES OF THE HOMES FOR YOURSELF!

When are we going to break out the piano wire for the banksters?

[Neidermeyer]

I second that !

[Chode]

[volunbeer]

So somehow, money-center and investment banksters found a way to float debt instruments and securities on 20% of absolutely everything that is worth anything on the planet.

How in the hell did they do that? They don’t have title!

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It’s worse than that. With fractional reserve banking we now have fractional reserve investing in derivatives and government backed securities. It’s the biggest ponzi scheme imaginable!

[stevie_d_64]

Where are they hiding?

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eggsactly!!!