“Nice bank you got here. Be too bad if anything happened to it.”
Bank of America wants to shake itself loose of the federal government, which is understandable (don’t we all?), but it can’t do it all at once. As the Wall Street Journal reported earlier this week:
Bank of America Corp. is offering to repay part of its bailout money, and the U.S. is pushing for the bank to pay at least $500 million to shelve a tentative pact that would have had the government share its losses on certain assets.
As the Journal went on the explain:
In addition to giving Bank of America extra TARP money, the government agreed in January to absorb a chunk of losses on a $118 billion pool of assets owned by BofA and Merrill. The bank would be on the hook for the first $10 billion in losses, and the U.S. would cover 90% of the remainder.
And what would the government get in return?
In exchange for this protection, the bank would issue to the Treasury $4 billion in preferred stock carrying an 8% dividend, costing the bank about $320 million a year. BofA also would pay the Federal Reserve two-tenths of a percent on the $118 billion, or $236 million.
If the bank wanted to end the arrangement, an “appropriate fee” was required. The Treasury and the Federal Reserve are asking the bank to pay between $300 million and $500 million to end this plan and pushing executives to consider a number on the high end of that spectrum, said a person close to the situation.
Seems straightforward enough. So what’s the problem?
The bank and the government never signed a final contract on the loss-sharing pact amid disagreement about what it would cover, and BofA said in May that it wanted out.
The government’s response?
Regulators argued that the bank benefited from the implied protection, and thus the bank should pay as if the agreement had been legally in place from January through May.
Actually, this line of business — offering “implied protection” and demanding payment even though no written agreement exists — was pioneered by another organization: the Mob.
September 6th, 2009 at 9:04 am
Gearino, the WSJ article says that BofA has accepted at least $65 billion worth of TARP I and TARP II money (somehow that’s conveniently omitted from your entry). And now they want the government to absorb 90% of “a chunk” of losses on some $118 billion pool of shaky assets they own as part of the Merrill Lynch acquisition.
We’re supposed to be outraged at a little arm twisting by Uncle Sam because he wants either some of his money back or some input as to how this institution that’s too big to fail - but did - conducts its business.
And how dare the federal government attempt to obstruct God’s work with his greatest gift to Mankind: unfettered capitalism?
I can see your foray to Steubenville or Stephentown, Texas did nothing to suppress your terminal tumescence for big business.
And here’s one guy’s vote for more drive by pontification and less number-crunching.
September 6th, 2009 at 9:27 am
And thank you, John, for yet another demonstration of your reflexive belief, despite all evidence to the contrary, that the government is just lookin’ after the public interest, and that political considerations never, ever enter into the equation. Why would the government (1) originally force TARP money into BofA’s hands, despite any obvious need beyond a show of solidarity among the nation’s financial institutions; (2) insist that BofA absorb Merrill Lynch when the bank, quite reasonably, saw it as a loser deal (which then caused another injection of TARP money to be necessary); and (3) seek to shake $500 million out of the bank for “losses” it never actually covered? Why, it’s all for us! The little guy!
September 6th, 2009 at 9:48 am
Mr. Dan,
I’m inspired! No wait, that’s gas. No, it is inspiration - gas feels different. It’s Sunday morning (first Sunday morning too, but I won’t be in church) so I got time to kill.
I respectfully beg your brief indulgence.
What does a guy like me do for fun? I mean stuff you can discuss in a semi-public forum among decent people. I’ll tell you one thing I do: I analyze trends in WAW reader responses, that’s what.
Ever wonder what tickles your public’s fancy? Ever pondered why one blog received dozens of impassions hits yet another stirred nary a “boo”? Ever wonder if our responses as readers influence what you write about? Well whether you do or not, I wonder for you.
Let’s look at this empirically. Say your musings normally fall into one of five general classifications:
1. Politics
2. Local events
3. Finance
4. Human Interest
5. Whimsy
On second thought, I’m adding one more. We’ll call it:
6. Gone Fishin’. I struggled with this one. You can make a damn good argument that it’s rightfully classified as a subset of Whimsy. I struggled with this, but in the end, it needs to be in a class by itself - kinda like your incomparable penchant for sloth.
So be forewarned, oh lazy and financially obsessed one. I’m feverishly crunching numbers myself. Screw finance. Screw crooked politicians (there’s an easy joke here that even I won’t touch). I’m fixing to shed some light on this curious blogger-reader relationship. Soon we’ll be standing naked before each other and I can’t wait.
I.C. still reads your blog, right?
September 6th, 2009 at 10:29 am
Most of us are members of Club Little Guy. If we don’t stick up for ourselves who will?
Are my beliefs reflexive? At any rate, you’re certainly welcome. And you should thank me too for being game enough to step into the ring with you.
Here I am a product of an extended stay in the DeKalb County public school system, doing my best to put up a respectable fight against a professional wordmeister. Overmatched as I am, I jab and move: jab and move. I got no spellcheck! I got no college edu-mi-kation! Hell, I’d rather eat my socks then wade through an article in the Wall Street Journal - or an article about an article in the Wall Street Journal.
What heart! What pluck!
Maybe I’ll get lucky before you land the inevitable haymaker. Maybe while the ref aint’ looking, I can land a low blow or two. How did that feel, sucka? You may have walked over here, but you’re gonna limp back.
“Down goes Gearino! Down goes Gearino!”
September 6th, 2009 at 11:19 am
John, I eagerly anticipate of your analysis of comments from readers of this blog. It’ll help me decide whether I need to install further security here at WAW World Headquarters. (I think I already know the answer: Absolutely, yes. In fact, my son has already offered to put his Marine sniper training to good use guarding the facility.)
September 6th, 2009 at 12:57 pm
I completed a quick analysis of the three-month period, May - July , 2008. I won’t bore you with details, but here’s what the numbers reveal; and they don’t lie.
* A small fraction of visitors to WAW actually post a comment.
* The post-to-visit ratio (p/v) ratio is about 8%
* Most posters are “regulars” who frequent the site at least once a week.
* Most posters find the WAW experience both enjoyable and edifying
* A breakdown of a Comment Analysis reveals the following:
a. comments fall into five general categories
i. brief, favorable
ii. brief, unfavorable
iii. thoughtful, well-informed
iv. totally off-point
v. pathetic cry for attention
b..Surprisingly (or not) most of my comments (in fact all of them) easily fell into categories iv and v.
c. Posting frequency is highest on Mondays and during the middle of the month
d. Politics and issues of local interest spawn the most responses
e. Financial blogs generate the lowest response frequency. Curiously, topics of finance also have the highest word count; so return (expressed as a words-to-posts ratio) is quite low. The highest word-to-post ratio was generated by Gone Fishin’ blogs. It’s acknowledged that this number is somewhat skewed by your “Hiatus” blog before you left on your Texas mattress gig.
To sum up; I’ve got good news and bad news. Mine was a small, but select sample. It indicates that you are admired and appreciated. Your readers know who you are and enjoy your unique perspective on subjects you care to expound upon. You’ve got a pretty decent Q factor for a journalist and blogger.
The bad news? Well…just how good a shot is your son?