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I question BofA's business practices and relationship with the government as much as the next guy, but this: "a huge portfolio of dangerous bets into a side of
by kunle 15y ago
I question BofA's business practices and relationship with the government as much as the next guy, but this:
"a huge portfolio of dangerous bets into a side of the company that happens to be FDIC-insured, putting all of us on the hook for as much as $55 trillion in irresponsible gambles. "
Fairly certain that $55 trillion approaches the overall GDP of the global economy. Its super easy to make compelling arguments about BofA without resorting to such exaggerations.
- anonymoushn 15y agoThat the total liabilities referred to are $55T is a fact. That the FDIC would be capable of paying out even a small fraction of that is an exaggeration, though.
- tedunangst 15y agoThere's no reason the FDIC would need to pay out $55T. They only need to cover insured deposits. Moving bad bets onto the books makes the insured deposits riskier, but it doesn't insure the bad bet as well.
- tedunangst 15y agoThat's possibly the notional value for all their derivative positions, but you're right in that BofA is unlikely to be in a position where they'd write a check for that amount. I think the author picked the biggest number he could find without understanding what it means. addendum: The same mistake is repeated elsewhere: '"About $350 trillion worth of financial products globally reference LIBOR," says one antitrust lawyer familiar with the case.' Unless I'm mistaken, that too is notional value. A swap or whatever is usually worth a lot less than its notional value.