I’m trying to figure out if I should be infuriated about the agreement allowing Bank of America to walk away from the asset guarantees it got as part of its January bailout in exchange for a payment of $425 million. I can piece together part of the story from The New York Times, Bloomberg, and NPR, but the complete story is a bit hazy.
The initial deal was that Treasury, the FDIC, and the Fed would guarantee losses on a $118 billion portfolio of assets; B of A would absorb the first $10 billion and 10% of any further losses, so the government’s maximum exposure would be about $97 billion. Part of that guarantee was a non-recourse loan commitment from the Fed, basically meaning that the Fed would loan money to B of A, take the assets as collateral, and agree to keep the assets in lieu of being paid back at B of A’s option. In exchange, the government would get:
(a) An annual fee of 20 basis points on the Fed’s loan commitment, even when undrawn (if B of A drew down the loan, which it didn’t, it would pay a real interest rate). The loan commitment could be interpreted to be only $97 billion, so this comes to $194 million per year.
(b) $4 billion of preferred stock with an 8% dividend. That’s a dividend of $320 million per year; B of A can buy back the preferred stock by paying $4 billion.
(c) Warrants on $400 million of B of A stock. B of A was at $7.18 the day the bailout was announced and yesterday it closed at $17.61, so if Treasury had gotten an exercise price of $7.18, those warrants would be worth about $580 million now.
Now, at this point I was furious, but then I found this provision in the term sheet:
“Institution has the right to terminate the guarantee at any time (with the consent of USG), and the parties will negotiate in good faith as to an appropriate fee or rebate in connection with any permitted termination.”
The question is, what does this mean? As far as the Fed loan commitment, it’s clear: Bank of America can walk away from that. Since they had the loan commitment for about nine months, their fee should be about 9/12 of $194 million, or $145 million. I’m fine with that.
But what about the preferred stock and the warrants? Is B of A getting all that back as part of the $465 million payment? The news stories aren’t specific on this point, but I’m pretty sure B of A is getting it back. I say that because all three stories refer to the government holding $45 billion of preferred stock in B of A. That $45 billion is quite clearly the $25 billion cash investment from October and the $20 billion cash investment from January – which implies that the $4 billion in preferred stock that Treasury got in exchange for the asset guarantee is gone.
B of A’s position must have been – actually, I’m having a hard time making their position in a reasonable way, because it’s so untenable – something like this: “In January, we all thought we would need that guarantee for a long time, and that’s why we gave you $4 billion in stock for it, but now it turns out we don’t need it, so let’s pretend we never gave you that stock.”
But this is clearly ludicrous. The deal was very clear. The government did something for B of A. In exchange, B of A gave the government $4 billion in stock. If the idea had been for the government to get, say $400 million in stock for each year the guarantee was in force, then that’s what they would have written into the term sheet. The economics of the deal were also very simple. B of A was in trouble; only the government was willing to give them an asset guarantee; that guarantee was worth at least $4 billion to B of A, and probably a lot more; so the government got $4 billion worth of stock.
So I’m still left wondering what this could mean: “the parties will negotiate in good faith as to an appropriate fee or rebate in connection with any permitted termination.” If I’m the government, I’m thinking: “I gave you something that was worth $4 billion at the time; you gave me $4 billion. Now you don’t want the thing I gave you; fine, throw it away. But what’s to negotiate? You already got something worth $4 billion.”
So the government negotiators should have been asking for $4 billion, plus nine months’ worth of dividends ($240 million), plus the value of the warrants ($580 million), plus nine months’ worth of the loan commitment fee ($145 million), for a total of $4.965 billion. But what did they ask for? According to an earlier (no longer available except in Google search results) version of the Bloomberg story, regulators were asking for “$300 million to $500 million.” And they got $425 million – which is basically the loan commitment fee plus one year of dividends on the preferred stock, meaning they got nothing, nada, zilch for the preferred stock or the warrants.
What possible explanation is there for this? Here are a few:
(1) B of A somehow convinced the government negotiators that the deal was really for $4 billion over some period of time, and hence the government didn’t have a right to it, no matter what the term sheet said.
(2) That “negotiate in good faith” clause was meant all along as a way for B of A to get out of the deal. That is, in January the government wanted to claim for PR purposes it was getting $4 billion in exchange for the guarantee, but nudged B of A and said that if things worked out, it wouldn’t actually be $4 billion.
(3) B of A threatened to go even more public with the claim that it only closed the Merrill Lynch acquisition under government pressure (remember, this asset guarantee was widely believed to be a quid pro quo for closing Merrill – see the Bloomberg headline, for example), and the government didn’t want that episode in the news again.
(4) As Bloomberg reports, “while the guarantee was announced in January, an agreement was never signed.” Wait a second. The deal was never signed? What? Why isn’t this a front-page scandal? Remember, the announcement of the guarantee bolstered confidence in B of A’s survival. (It may not have been good for the stock price because of the dilution, but it was a signal that the company would not be allowed to go bankrupt.) Even if nothing was ever signed, there is no way the government would have been able to back out after going public with the guarantee. So the taxpayer was committed. And somebody forgot to get B of A to sign the piece of paper? Or was this a conscious oversight to make it easier for B of A to get out of the deal later?
OK, now I’m infuriated. Shouldn’t you be?
Update: A Congressional source tells me that the deal was never closed because the parties could never agree on which assets to include in the pool to be guaranteed. This, of course, raises the question of why they couldn’t agree – after all, we did it with Bear Stearns, and we did it with AIG. (Did we do it with Citigroup or do we have another of these problems hanging out there?) The point is there’s no reason Treasury couldn’t have gotten this done. But B of A had no reason to want to close the deal – it got a benefit in the markets strictly from the announcement, and if it ever needed the guarantee there’s no way the government would refuse simply because nothing had been signed. So it was up to Treasury to close the deal and get the $4 billion in preferred stock.
My source also says the $425 million payment is supposed to represent the benefit that Bank of America got from the guarantee over the last nine months. But it doesn’t. A guarantee is insurance. Let’s say you pay $1,000 for a one-year insurance policy for your house. At the end of the year, can you go to your insurance company and ask for the $1,000 back because your house didn’t burn down? If B of A and Treasury agreed on a price of $4 billion, then that’s the price; it has nothing to do with what happens later. So even if the deal was never closed, the “regulators” should have been asking for a lot more than $300-500 million as the value that Bank of America got from the relationship. As StatsGuy points out below, they could have gone to court for it; as even a first-year law student knows, an agreement doesn’t have to be written down and signed to be binding (and I assume at least the term sheet was signed by both parties).
By James Kwak
The Baseline Scenario 
Is Judge Rakoff reading this? Isn’t this the same exact problem as the SEC-BOA “settlement”?
—-E
Together with the death in the senate of the financial consumer protection agency, we can call it a day.
“while the guarantee was announced in January, an agreement was never signed.”
Wouldn’t it be a scandal if B of A gave hundreds of millions of dollars to the government that it didn’t owe? Would they be properly taking care of their shareholders?
“Even if nothing was ever signed, there is no way the government would have been able to back out after going public with the guarantee.”
I agree, which is why I am infuriated at the incompetence of our government officials, not B of A. They should have forced a deal, with the threat of going to Congress for new powers, if necessary. Alas, they let them off the hook. Now if we ever see a Treasury official who was involved with this get a job at B of A….
Well, considering that they didn’t specify a break up fee, it’s unrealistic to be able to say they should get the full benefit of the deal.
That’s the same as saying a company in a merger deal with a smaller partner should get the full value of the smaller company if it breaks up the merger deal.
Essentially, this is a break up fee. $425M being 10% of the potential $4.3B seems fine to me…
To clarify, I’m saying that the only benefit of the deal they received was the loan financing from the Fed, which they seem to be paying for…; I don’t think any preferred shares exchanged hands.
I see your point, but then the problem is that the government never closed the deal. It would be at best incompetent to make a binding commitment on behalf of the government without getting a binding commitment from the other side to the terms of the deal. The difference from a typical acquisition is that the government’s guarantee became binding on announcement, because the government cannot back away from such a guarantee. In a merger, everyone knows that a definitive agreement is non-binding in the sense that you cannot enforce specific performance.
Hmm… maybe there’s a lesson in all of this – a moral perhaps about what government should or should not be allowed to do for the sake of large banks in the face of a financial crisis.
Something about the inevitable corruption inherent in secret, ad-hoc, improvised dealings larded with undisclosed wink-wink “understandings” about who might do what for how much public money whenever the media’s attention is distracted elsewhere.
Nope, never mind. Nothing to learn here…
Just one more converging probability..another vector pointing to corruption. I would like to see the agreements between the government and Goldman, Citi, etc. Signed or unsigned? We should demand that these docs be made public under the FOIA. How about we prosecute the lawyers who negotiated this agreement for economic terrorism? OK, I will calm down and settle for fraud.
The 4 billion is very relevant because B of A wouldn’t be here today without direct and immense support from the government. Now they are literally telling taxpayers “thanks for nothing” and going on with making their millions. It’s mostly insulting from a personal viewpoint but from a business standpoint its fraudulent.
Wake up America. The banksters operate under their rules. The mafia theirs. The latter at least have a code to follow.
Outraged, you bet. Another notch in the belt of the fat cats and another punch in the gut to the little guys. It is time to stand up and stop doing business with Bank of America and take them down.
#3.
#4 is meaningless. The “Deal not being signed” is insufficient to explain the lack of effort. At the very least, the government could take BoA to court and litigate – probably get a portion of the difference as a settlement. If it wanted to, which it doesn’t. Because of #3. #1 and #2 are just too implausible at face value given the public attention focused on this issue.
A verbal contract isn’t worth the paper it’s written on. — Samuel Goldwyn
(4) is absurd on its face;
(3) would’ve been moot to me since I would’ve come in fully demonizing every aspect of the Bush policy.
So 1,2,3 all look like variations on the same thing: a corrupt, corporatist administration came in fully conscious that its ideologically determined priority was the succor of the finance racket at the expense of the people. The people constitute a mine and a dump, and nothing more.
And so it is to this day.
Aren’t verbal agreements are still agreements from a legal standpoint, especially when the terms were followed up to and until it came to backing out? Having an unsigned contract that was mostly followed to the letter implies that there was an agreement, right? Difficult but not impossible to prove if one party had the desire to litigate, but hey I’m not a lawyer.
“OK, Now I’m infuriated. Shouldn’t you be?” James these aren’t the type of questions you should ask a man after he’s had his anal cavity pumped.
What would be interesting James is to get someone who is extremely knowledgeable about finance to give their opinions on this. I imagine Warren Buffet is to busy playing bridge and downing Cherry Cokes to join our merry group here. Michael Milken would be good, assuming he has morals or scruples. Anyway some guy who has a deep background in Finance who can crunch numbers in his mind to give his breakdown or at least an opinion on how badly we were shortchanged.
How about this idea James?? Lee Iacocca is retired and is a man who’s never been shy of attention. How about contacting Lee Iacocca and asking him to guest post how Chrysler paid back its loan, and how Chrysler’s loan terms compare to Bank of America’s loan terms??? Or even Lee Iacocca’s finance people at that time. I bet they would have some opinions on this.
This wasn’t just a merger, the guarantee on debt was a service rendered, a valuable service for which a high price was negotiated. Moreover, since the agreement required Fed consent, the Fed could have driven a harder bargain.
I’m more of the opinion that the regulators never intended to hold BoA to the agreement, which explains why they didn’t really try.
The guarantee (as announced) was an important part of the merger and certainly material information. Also, B of A has issued new securities in the meantime. How is it that the fact that the guarantee was not actually executed is only now becoming known?
Even if the bank did not disclose it, there is something seriously wrong with the idea that our government would be OK with giving the false impression (or letting that impression persist) that the bank had received a massive guarantee that it had not in fact received.
I agree with your point on the coverage – use distinction. And insurance is not the only type of arrangement that works that way. You can incur a cost for a credit or liquidity facility, just to have the facility available, whether you use it or not.
What a joke.
It’s all just a little exercise in post-modern deconstructivism that accidently went wild….It’s just some innocent linguistics reflecting a manifestation of human thought (and or thoughtlessness) and relations transforming into little re-distribution of social wealth…
p.s. In school I was always puzzled over the whole post-modern thing and all the philosophical stuff that insisted linquistics underlies human cultural evolution – this example clarifies so much for me – I think I get it now!
This is the second order effect of TBTF called TBTFD too big to face down. If BofA can do this to us, it’s scary to even consider what Goldman Sachs could do. They’d probably get Alaska or the Louisiana Purchase from us.
I think James point is, that the U.S. Government did IN FACT guarantee the loan. No doubt that the government guaranteed the loan. The problem is, now Bank of America is taking back the $4 Billion in preferred stock, which in fact Bank of America owes the U.S. government for guaranteeing the loan.
Seems like 4 billion would be a fair price for BoA to pay the USG for keeping their bonus money coming and the value of their stock options from vanishing.
It’s so touching to see such intelligent people shocked at “discovering” that the U.S. Government is a wholly-owned subsidiary of the wealthiest corporations.
It is if it’s digitally voice recorded…
Isn’t it time to decide what RICO standards Ben Bernanke and Tim Geithner should be prosecuted under? How do these two pull this crap and nobody within Congress even decides that it is worthy of subpeona? This is the most corrupt government/corporate scandal ever in the history of this country, and nobody is doing anything to put a stop to the single-minded transfer of wealth from the taxpayers to the corporations.
I’m disgusted.
The people in power are much the same – Bernanke was highly involved in the Merril deal. Geithner was at the NY Fed. Of the trio, only Paulson is out. No one currently in power wants any of those conversations to become public.
The USG is now part of the confidence game. Here’s how the meeting must have went between someone from the Tres and a bunch of BoA lawyers:
“USG: You are in trouble and could take the financial market with you, but that’s just a perception issue. We’ll issue a statement that the USG will backstop your screw-ups and once people see this their perceptions will change. When they do, you go forward like nothing happened because nothing did. We don’t hit you for any fees, and you don’t go tits-up and implode the economy.”
“BOA: Deal.”
Issue press-release. Go home.
Nothing on the ground is different. People who were ready to trade BoA as if it were dead worry about something else. The can gets kicked down the road a ways.
Now, if BoA could actually clean up its books a bit in the time so purchased, fine. They didn’t, in part because they can’t, and in part because they’ve learned a new trick; get the USG to issue a press-release saying how everyone is still friends forever. If the economy improves (or just doesn’t implode) and things are swept under the rug, then bonuses for everyone. If the economy mindlessly blows up anyway, well then everyone is in too fine a panic to remember anything about all those confidence games.
cougar
before i get mad, there’s one thing i’m unclear about.
james, from your description of the presumed initial terms, it looks like bofa could have paid the govt $4B to get the preferred stock back and _kept the guarantee in place_. is that a correct interpretation?
I think we have two separate issues here – a recognized moral / political obligation and actual enforceability. I understand that contracts can be verbal, etc., but I would pay for the entertainment of seeing an attorney walk into court and argue that they had a $4 billion verbal contract. Come on…
However, this is TBTF world now, and B of A understood that the government was not going to renege on the assistance when the financial system was in such a fragile state for the same reasons the assistance was offered in the first place. Why should they fear the government taking a hard line as far as giving taxpayers fair consideration for the assistance offered? The banks’ survival (read: profitability) comes before everything else.
Somehow these people can manage to screw stuff like this up, try to keep it covered up, and we’re going to let them re-write the financial system? What could possibly go wrong?
The fact that the guarantee was never formalized would have been very important information to investors in the meantime.
q,
the correct interperation is “nothing to see here, keep moving on”.
This is a very straight forward contract question.
I would argue that the contract was ratified by performance-the government’s-under the terms of the mutually executed and exchanged terms sheet and supporting documents-and the absence of a timely refusal of performance or objection to performance on the part of B of A. Thus, as a matter of equity, B of A can not fall back on a Statute of Frauds argument(which is what the no signature argument is), having received the benefit of the bargain-the government’s performance.
This assumes of course that the government originally wanted to hold B of A to the bargain, or now wants to hold B of A to the bargain.
My guess is that history 1-2-5-10 years from now will reveal a whole lot of schenanigans, and that the situation was and remains very dire.
James, thank you for covering this. It seems to be only the most recent in a series of unnecessary, unwarranted, and arguably unethical wealth transfers from the general public to the financial sector. I hope you will continue to investigate this particular transaction. You might also consider compiling a list of such transactions as you encounter them, perhaps together with your estimate (very rough would be fine) of how much money was transferred. Perhaps you and Simon could also give your subjective “outrage” ratings. I suspect such an exhibit could become a popular and oft-cited resource for people concerned about these matters, especially if it offered an approximate running tally of the total wealth transfer from Main Street to Wall Street.
CAN SOMEONE EXPLAIN TO ME HOW INVESTMENT BANKERS WHO GET PAID VAST SUMS OF MONEY TO BE THE BRIGHTEST BOYS IN THE ROOM CAN FIND THEMSELVES SHORT $15 bil in one quarter?
And how can the salvation of the economy – the US government – structure such a crappy deal?
(FWIW, I think BoA didn’t sign the deal because it – the Merrill/warrants/bailout stuff – was all done kind of in a backroom, cigar-smoky kind of way.)
This is anything but surprising. Monsters have been created. Predominately because our leaders and regulators refused to do their jobs as mandated by statutes and regulations. And, never once through this entire clandestine debacle have the interests of the 300 million American people been even remotely considered, let alone advocated for.
This eventuality should never have happened. Bank of America should not exist today. Nor, should Citibank. Nor should many other of our remaining (now larger and more too big to fail) too big to fail banks and financial service institutions.
Thomas M. Hoenig is the Kansas City Fed Governor. He has spoken on several panels with Simon Johnson. He was directly involved with the S+L debacle, and resulting response, statutes, and regulations. According to Mr. Hoenig, there is a third option that is not only available, but was legally mandated to take to resolve this crisis.
Specifically:
OPTION 1 Is Lehman. Too bad, so sad, want a friend, buy a dog. Brutal capitalism failure resulting from poor business decisions, with attendant fallout.
OPTION 2 Is a closed door smoke filled shotgun wedding a la Bears Stearns and Merrill, with attendant perks to suiter, and/or government bailouts, guarantees, tax breaks, etc. a la B of A, Citi, Wells, JP Morgan Chase, Goldman, etc. Option 2 preserves the company, minimizes job losses, minimizes counterparty fallout, minimizes financial system confidence loss, etc.
OPTION 3 Is what Mr. Hoenig argues the U.S. WAS LEGALLY REQUIRED TO DO BUT DIDN’T. It is a combination of options #1 and #2. Our government was legally required based on the laws and regulations passed in the wake of the S+L crisis to immediately take these institutions into receivorship when they were insolvent based on well established rules and parameters, wind them down, restructure them, break them up, and sell them off in pieces over time, as appropriate, when it made sense to the taxpayer.
Just think if option #3 had been taken…..
The ownership is not shocking.
The scale at which we’re getting screwed is.
For many years the Wall Street Journal has taken the Republicans side 95% of the time in their Editorial pages. Which is fine when they put it in the editorial section. No problem there.
But you know, there WAS a time, when the Wall Street Journal would have taken the lead on story like this, having investigative reporters hunting leaks, hunting paper trails, digging for details, instead of sitting around and letting the New York Times bring us the dirty details.
Assuming your reporting is accurate the only conclusion one can draw is this administration is as corrupt as any.
Change You Can Believe In my backside.
The situation is worse than you think (or perhaps better). The bailout wasn’t required because the banks were trillions in the hole. The bailout was required because exercise of the same financial gymnastics that produced the paper profits suddenly required the banks to book astounding paper losses. Nothing happened except the credit markets froze up. Read Gillian Tet’s Fools Gold (if you can stomach all the drivel about individual banker celebrities, their resumes, their egos and their mea culpas), if you need a summary of how this worked.
What is real of course is the collapse of consumer credit. Latest Fed statistics show it in decline at a 10% annual rate. We have refinanced the banks but the banks will not be refinancing consumers. Deflation is on the horizon. Worry more about that.
Deflation?
I thought it was runaway inflation due to the excess money supply 3 months ago. Can you make up your mind?
Basically you have people predicting the extremes so they can proclaim themselves geniuses later. Apparently the most likely scenario—very low inflation, isn’t sexy enough for them. It’s as simple as this, sellers are not going to lower prices now, and you can’t raise prices with high unemployment, not on a large “basket” of goods anyway. Not unless you foresee something like war.
They can show you all the graphs and numbers they want, that’s what it gets down to.
What I find interesting is an American culture of “gaming” the system.
It seems the financial elites have carte blanche to game the system it operates in. But the argument against health care reform is sometimes based on the hypothetical and real “slackers” will game a health benefits funded by taxation.
So it seems the financial elites get to game the system. The for-profit health business gets to game the system. But the middle and working class are asked (some are ideologically convinced) they must hold the line against healthcare delivery to the allegedly-undeserving minions.
The value system is entirely mixed up here.
Thanks, that was what I was thinking, but I failed to spell it out clearly.
To be fair, if that is the right word, B of A’s Q1 proxy statement does say that the deal with the government had not yet been closed. So it was out there. But no one picked up on it that I know of.
Two answers:
1. Yes, that’s the way it should have been. $4 billion was the premium – if the gov’t got it in cash or stock, it’s the same thing. B of A still had to pay 20 bp on the commitment, and OIS + 300 bp if it actually used the guarantee.
2. In practice, the terms of all those preferred stock investments say that Treasury can decide whether the bank can buy the stock back or not. So that would also have become a negotiating point. But I think my answer #1 is the way it should have been.
I think this hole market is a ponzi scheme, check out this article http://seekingalpha.com/article/163213-ten-reasons-for-an-imminent-stock-market-crash its pretty good on all the stuff that’s going on
Ted K I believe you are considering the prognosis of rampant inflation secondary to supply/demand/price tugs in the marketplace? Perhaps the prognosticators are suggesting inflation secondary to a currency event. The slow but deliberate devaluation of the dollar as desirable to decrease the real cost of future debt repayment + the increasing desire of several foreign countries- not the least of whom includes the BRIC countries to replace the dollar as reserve currency through a prolonged but systematic approach to move out of the dollar that is already quite neatly in place exemplified by settling trades in yuan, buying as many natural resources & upstream companies as possible in USD, buying as much gold as the IMF will “sell”, and so on.
This defacto “agreement” between the FED & BoA is enangering but not surprising. It will be interesting to see who benefits from this arrangement in 5 years- who moves to what positions, board appointments, lucrative consulting contracts, on & on.
The one group we ALL know who will NOT benefit will be the taxpayer.
I appreciate the discussion on contract law as it may apply in this instance.
anne: “CAN SOMEONE EXPLAIN TO ME HOW INVESTMENT BANKERS WHO GET PAID VAST SUMS OF MONEY TO BE THE BRIGHTEST BOYS IN THE ROOM CAN FIND THEMSELVES SHORT $15 bil in one quarter?”
When I first heard the phrase, “the smartest guys in the room”, I thought it was damning with faint praise. Later I found out that it was praising with faint praise. However, as things have unfolded, I think my original interpretation was correct. ;)
Ted K: “But you know, there WAS a time, when the Wall Street Journal would have taken the lead on story like this, having investigative reporters hunting leaks, hunting paper trails, digging for details, instead of sitting around and letting the New York Times bring us the dirty details.”
There was a time when the Wall Street Journal was the best paper in America.
Ted K: “Basically you have people predicting the extremes so they can proclaim themselves geniuses later. Apparently the most likely scenario—very low inflation, isn’t sexy enough for them. It’s as simple as this, sellers are not going to lower prices now, and you can’t raise prices with high unemployment, not on a large “basket” of goods anyway. Not unless you foresee something like war.”
This is no prediction, but I fear that the most likely scenario is low inflation via defaults and bankruptcies, leading to a double dip.
tippygolden: “What I find interesting is an American culture of “gaming” the system. . . .
“The value system is entirely mixed up here.”
You must understand that only members of The Club are allowed to game the system. In fact, that is a major perk of being a member of The Club. The Club is the system, and the system is The Club, so it is not really gaming the system.
As for the general populace, they exist to support the system, and the system supports them in return, albeit at a subsistence level.
The system is global, and is known to the cognoscenti as La Sistema. La Sistema holds the world economy together, and keeps it from disintegrating into chaos and anarchy. Viva La Sistema! La Sistema de los Ricos, por los Ricos, para los Ricos.
;) (I think.)
I hope you turn this into a NYT op-ed. Especially when you contrast the $4b to BAC w/ the recently announced WH cost-cutting contest http://bit.ly/VJ8pW & it’s difficult to have much confidence or faith in this adm.
What infuriates me is that B of A is STILL benefiting from the guarantee. It is surely still underwater if its assets are properly valued, yet it has been revealed that the government will not allow it to fail. Now, if we had in place an effective FDIC-like procedure for the TBTF’s in the event of another untoward crisis, things might be different. As it is, announcing it doesn’t need the guarantee any more is a pretty meaningless gesture by B of A. If B of A is really getting no continued benefit, they should have no objection to the government issuing a statement that next time, B of A is on its own. In fact, if it really wanted to, the government could probably use the threat of such a statement to force B of A to live up to the original agreement.
I think all of it is just absurd! It all boils down to the government, actually the taxpayers, being ripped off once again by good ole Bank of America, and now they can continue to charge their outrageous finance charges and watch as the people who had no control over what the government did with their money(bailout), take a nose dive with their once very good credit and just push the economy and the people of our nation further into despair and economic hardships!!
James, get a life. If you or we believe ANYTHING that the government tells us, we are just saps and dupes. The Oligarchy in just one more of a series of incredibly profitable hours, at our expense. If mythical guarantees work, why even bother with real ones, but rather let scenarios play out. If they go in the bank’s favor, wonderful, if they don’t the government will prop them up (enen if nothing has been signed.
In the real world, I hope that Iran gets nuclear and blows all of us up. What’s the point in caring, if we are, in the long run, completely and utterly powerless. It appears that we have far more to fear from our banks than all of the Islamic terrorists ever born. Ultimately they and their lobbyists, in cahoots with our elected (and appointed) officials, are more than happy to blow up our worlds. Or as T. S. Elliot famously said in his famous “Love Song..”, “this is the way the world ends, this is the way the world ends, not with a bang but a whimper.”
But, y’all hang in there and pray, because prayer will work just as well as anything or nothing.
Wow. There is so much to say here, but I will only raise one point.
The government’s **implicit** guarantee — regardless of any argument regarding the status of an “official agreement” — resulted in tremendous increases in BoA’s market capitalization (let’s face it, investors bought Big Bank stocks because of the feeling that the government would not walk away from the banks). Not to mention how the behavior of the banks over the past 12 months was driven by their own feeling that the government stood by their side with a fire hose at the ready
And now BofA can just walk away and pay a fraction of the true value of a lifeline.
In any other set of circumstances, the Department of Justice would feel compelled to sniff around the area of this “deal.”