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BoA has a market cap of $219.83 Billion. The unrealized losses are more than half of that. That's... concerning. When I hear statements like "the lender has st

BoA has a market cap of $219.83 Billion. The unrealized losses are more than half of that. That's... concerning. When I hear statements like "the lender has strong liquidity with consumer deposits and higher capital," I immediately think about a run-on-the-bank. If I had my money there, and I read a statement like that, I'd be discreetly moving it elsewhere. The article concludes "this is a problem only if you have to sell them." That doesn't seem like an unreasonable scenario.

HDThoreaun 3y ago
As long as rates eventually go back down before boa runs out of money this really isn't an issue. Of course you point out that they very well could run out of money but imo boa is easily in the "too big to fail" category. It would be bailed out if it faced major trouble, possibly even just the fed deciding to end the high interest rate era and "solving" the whole thing. Certainly bankees would be saved as they were at the other failed banks which removes most of the incentive to run the bank.
- lp0_on_fire 3y ago
  > imo boa is easily in the "too big to fail" category. Then Bank of America needs to be shattered into as many pieces as it takes to no longer be in the "too big to fail" category.
  - RCitronsBroker 3y ago
    Banks are investment vehicles that utilize a novel structure (being a bank) to enjoy the investment edge of, in case of failure, being able to hold customers money hostage, thereby strongarming the government into bailing them out to avoid the risk of financial mayhem.
    - lp0_on_fire 3y ago
      Correct - it's legalized extortion for all intents and purposes.
    - uticus 3y ago
      I appreciate the sarcasm. Of course it would take a lot more to prevent the money being held hostage than making it illegal. The whole concept of fractional-reserve banking would have to be abandoned. Whether you like the idea or not, we're stuck with it, there's no way to change it at this point.
      - kylebenzle 3y ago
        I can't believe Im reading this comment on 2023! For TEN YEARS we have all had the ability to be our own bank. TEN YEARS ago I was telling people that within a year people would be carrying their net worth in their pocket and everyone would be their own bank in 5. Now, TEN YEARS later we still have people bemoaning the fack we are "dependent of banks". Lol, we are dependent on banks like a heroin addict is addicted to his fix, their cheap, easy free money. Banks are a sickness.
        quonn 3y ago
        If you refer to bitcoin, that‘s not new, you could with withdraw and store cash before. Or even gold. Or other small assets, such as art. Bam, no banks. And all of those options are as good or better than crypto. At least as long as you can‘t pay taxes in crypto and can‘t pay most services.
        dmoy 3y ago
        It's hard to read between the lines. "Be your own bank" in particular is a specific form of finance woo that gets peddled (also under the terms "infinite banking", "cash flow banking", etc). All of those are layers on top of really, really crappy life insurance policies. But the "hold net worth in pocket" part does sound like crypto.
- RandomLensman 3y ago
  Why would rates need to come down again? The mark-to-market of those securities will go back to par regardless. Or are you saying they are financed via floating rates and negative carry will start to hurt them?
  - HDThoreaun 3y ago
    BoA deposits are down 8.5% yoy. This is forcing them to take out expensive loans from other banks that cost more than the loans they made early pandemic. Not a crippling issue, but they are losing money everyday rates stay high.
    - supportengineer 3y ago
      I received an offer from BofA for a 4.00% savings rate if I brought X amount of new money into the bank. Anyone else get an offer like this?
      - hiatus 3y ago
        Ally bank offers over 4% for any amount, and has a no-penalty CD (you can close the account at any time, they use a trust behind the scenes) offering 4.5% iirc.
      - ganoushoreilly 3y ago
        A few banks have been offering 4.00 or higher for the past 9 months or more. The apple card with Goldman Savings is currently at 4.15% and has been since it launched. It was mostly smaller banks that I saw offers in this range, but It looks like the bigger banks have to play along now, lest they lose more inflow.
      - lotsofpulp 3y ago
        You can get 5.02% if you bring $100k to them anytime. They only make it available in a Merrill CMA (cash management account) though (see preferred deposit in pdf below). You can also reduce that $100k to $1 after you make the initial deposit and still maintain access to that savings rate. https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/ICCRateSheet.pdf https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMO... The preferred deposit account has always paid very competitive savings rates amongst all FDIC insured accounts.
- landemva 3y ago
  > the fed deciding to end the high interest rate era I observe, with two USA war fronts, broad inflation will remain high and Federal Reserve will follow inflation with increasing rates. Treasury's Yellen says we can afford it. https://www.foxbusiness.com/economy/yellen-says-us-afford-support-two-wars-america-stands-behind-israel-period https://www.foxbusiness.com/economy/yellen-says-us-afford-su...
ot 3y ago
Comparing the balance sheet fluctuations of a bank to its market cap is meaningless. Banks are extremely leveraged by their nature, BA has like $3T in assets and $2.8T in liabilities, so minor swings in assets value move the equity by amounts that are comparable to the market cap.
- samspenc 3y ago
  Thanks for this info, if I'm understanding this right, the current $131.6B in unrealized losses pales in comparison to their total 2.8T in liabilities (less than 5%). So even if they did have to sell all their bonds and lose all that money, it will account for less than 5% of their total liabilities and they would still be positive when calculating assets minus liabilities?
  - ot 3y ago
    Yes, according to those numbers BoA is technically solvent.
- jerf 3y ago
  It does not follow from "Banks are extremely leveraged by their nature" that fluctuations in its asset value are meaningless. It is, right up until it isn't, and then it suddenly means everything. Which means it isn't meaningless at all. It's not like we live in a world where we've been banking for thousands of years without this ever being a problem. It was most recently a problem this year, and if your memory is fuzzy, it wasn't just Silicon Valley Bank. If you're going to excuse that away, then it was most recently a catastrophic problem in 2008, which isn't exactly "hasn't been a problem since the Roman empire" or anything. And if you're going to make excuses for the Global Financial Crisis and how that doesn't actually matter and doesn't need to be incorporated into anyone's models of how banks work, well, our world views are irreconcilably different. I can promise you the banks don't believe it's irrelevant.
  - dmoy 3y ago
    Note GP didn't say "fluctuations in its asset value are meaningless", they said "Comparing the balance sheet fluctuations of a bank to its market cap is meaningless". For example US Bank has $50B market cap, $500B deposits, and closer to $700B total assets.
deleted 3y ago
[deleted]
RC_ITR 3y ago
>I immediately think about a run-on-the-bank. If I had my money there, and I read a statement like that, I'd be discreetly moving it elsewhere. Congratulations! Whether intentional or not, you're trying to start a bank run! Please don't! The reality of the matter is literally any bank could not survive a bank run. Even JPMorgan. The entire business model of a bank is to take deposits, hope people ask for them in a predictable way, and then lend them out to people (often as mortgages or Treasuries, but also as a lot of different things). It's a weird system, but it's what we got. What is happening here is that the resale value of treasuries fall as interest rates rise. This is due to the weird quirk of treasuries having a set payment schedule, which forces the face value to change in order to reach parity with market interest rates. The amount that the government owes BoA at maturity is still the exact same number. Nothing about those Treasuries has actually changed other than the fact that they earn less interest than a newly issued treasury and if BoA needed to sell them quickly, they would be worth less than what they were paid for. As you'd guess, this only becomes a problem when people run the bank and the bank needs to sell those Treasuries to meet deposit requirements. In reality, if BoA gets in trouble, since it is a GSIB, the US government would just spot the bank the original value of those Treasuries (since again, nothing about them has actually changed and the government still owes BoA the original price eventually), everyone would complain, and then we'd move on. Things will be a lot nicer if we don't have to do that, so please stop!
- nemo44x 3y ago
  > Nothing about those Treasuries has actually changed other than the fact that they earn less interest than a newly issued treasury and if BoA needed to sell them quickly, they would be worth less than what they were paid for. They bought them with money that isn't theirs and if they were to sell them all to return people's money then they would be bankrupt. So yes, a lot about those Treasuries has changed as the value of the asset is based on time and rate. Those Treasuries do in fact have a market price and although they'd return all their principal eventually, it isn't today and is actually a long time from today. It's completely disingenuous to say "nothing has changed". Nothing has changed other than the fact that the market value of the treasury is far less than what the bank could stand if forced liquidate them. Only a fool would keep any sort of serious money with BoA that isn't FDIC insured, etc.
unyttigfjelltol 3y ago
Compare to the Federal Reserve's own realized losses of over $100b[1] and recent articles pointing out that's actually an off-balance-sheet liability of member banks[2]. These aren't the Signature Banks and SVBs of the world and for that reason the concern on this board about what happens if the trend line extends still further-- it won't be. The concern really should be that this all represents a policy response that cannot be sustained, and so it won't be. [1] https://www.reuters.com/markets/us/fed-is-cutting-staff-after-more-than-decade-payroll-growth-2023-09-22/ https://www.reuters.com/markets/us/fed-is-cutting-staff-afte... [2] https://www.wsj.com/articles/the-new-bank-bailout-fed-member-district-banks-taxpayers-losses-b1b4735e https://www.wsj.com/articles/the-new-bank-bailout-fed-member...
- landemva 3y ago
  > this all represents a policy response that cannot be sustained, and so it won't be. Are you implying increased interest rates, as set by Federal Reserve, will not continue? Or that Federal Reserve plan to pump underwater bank UST holdings will be enough to make it all OK? "The Bank Term Funding Program (BTFP) is a lender of last resort facility. It was created in March 2023 ..." https://www.brookings.edu/articles/what-did-the-fed-do-after-silicon-valley-bank-and-signature-bank-failed/ https://www.brookings.edu/articles/what-did-the-fed-do-after...
  - JumpCrisscross 3y ago
    > Are you implying increased interest rates, as set by Federal Reserve, will not continue? This is a recurring meme in Silicon Valley. To the point that I think executives at SVB believed it: that the Fed is constrained in raising rates by things like balance sheet losses or the interest cost of the federal debt. (It's not. It's constrained by job losses.)
    - landemva 3y ago
      SVB didn't care and had a C-level on board of directors of S.F. branch of Federal Reserve which was SVB's regulator. To clarify, I think it is likely increased interest rates will continue. Federal Reserve follows interest rates / inflation numbers, and war brings inflation.
deleted 3y ago
[deleted]
onlyrealcuzzo 3y ago
Good thing it's unrealized!
supportengineer 3y ago
Any consumer with $250k or under at BofA has nothing to worry about.
plonk 3y ago
What does a bank write if it's in a good place and the rumors are baseless? Or do you just leave the bank regardless of that to be sure?

HDThoreaun 3y ago

As long as rates eventually go back down before boa runs out of money this really isn't an issue. Of course you point out that they very well could run out of money but imo boa is easily in the "too big to fail" category. It would be bailed out if it faced major trouble, possibly even just the fed deciding to end the high interest rate era and "solving" the whole thing. Certainly bankees would be saved as they were at the other failed banks which removes most of the incentive to run the bank.

lp0_on_fire 3y ago
> imo boa is easily in the "too big to fail" category. Then Bank of America needs to be shattered into as many pieces as it takes to no longer be in the "too big to fail" category.
- RCitronsBroker 3y ago
  Banks are investment vehicles that utilize a novel structure (being a bank) to enjoy the investment edge of, in case of failure, being able to hold customers money hostage, thereby strongarming the government into bailing them out to avoid the risk of financial mayhem.
  - lp0_on_fire 3y ago
    Correct - it's legalized extortion for all intents and purposes.
  - uticus 3y ago
    I appreciate the sarcasm. Of course it would take a lot more to prevent the money being held hostage than making it illegal. The whole concept of fractional-reserve banking would have to be abandoned. Whether you like the idea or not, we're stuck with it, there's no way to change it at this point.
    - kylebenzle 3y ago
      I can't believe Im reading this comment on 2023! For TEN YEARS we have all had the ability to be our own bank. TEN YEARS ago I was telling people that within a year people would be carrying their net worth in their pocket and everyone would be their own bank in 5. Now, TEN YEARS later we still have people bemoaning the fack we are "dependent of banks". Lol, we are dependent on banks like a heroin addict is addicted to his fix, their cheap, easy free money. Banks are a sickness.
      - quonn 3y ago
        If you refer to bitcoin, that‘s not new, you could with withdraw and store cash before. Or even gold. Or other small assets, such as art. Bam, no banks. And all of those options are as good or better than crypto. At least as long as you can‘t pay taxes in crypto and can‘t pay most services.
        dmoy 3y ago
        It's hard to read between the lines. "Be your own bank" in particular is a specific form of finance woo that gets peddled (also under the terms "infinite banking", "cash flow banking", etc). All of those are layers on top of really, really crappy life insurance policies. But the "hold net worth in pocket" part does sound like crypto.
RandomLensman 3y ago
Why would rates need to come down again? The mark-to-market of those securities will go back to par regardless. Or are you saying they are financed via floating rates and negative carry will start to hurt them?
- HDThoreaun 3y ago
  BoA deposits are down 8.5% yoy. This is forcing them to take out expensive loans from other banks that cost more than the loans they made early pandemic. Not a crippling issue, but they are losing money everyday rates stay high.
  - supportengineer 3y ago
    I received an offer from BofA for a 4.00% savings rate if I brought X amount of new money into the bank. Anyone else get an offer like this?
    - hiatus 3y ago
      Ally bank offers over 4% for any amount, and has a no-penalty CD (you can close the account at any time, they use a trust behind the scenes) offering 4.5% iirc.
    - ganoushoreilly 3y ago
      A few banks have been offering 4.00 or higher for the past 9 months or more. The apple card with Goldman Savings is currently at 4.15% and has been since it launched. It was mostly smaller banks that I saw offers in this range, but It looks like the bigger banks have to play along now, lest they lose more inflow.
    - lotsofpulp 3y ago
      You can get 5.02% if you bring $100k to them anytime. They only make it available in a Merrill CMA (cash management account) though (see preferred deposit in pdf below). You can also reduce that $100k to $1 after you make the initial deposit and still maintain access to that savings rate. https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/ICCRateSheet.pdf https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMO... The preferred deposit account has always paid very competitive savings rates amongst all FDIC insured accounts.
landemva 3y ago
> the fed deciding to end the high interest rate era I observe, with two USA war fronts, broad inflation will remain high and Federal Reserve will follow inflation with increasing rates. Treasury's Yellen says we can afford it. https://www.foxbusiness.com/economy/yellen-says-us-afford-support-two-wars-america-stands-behind-israel-period https://www.foxbusiness.com/economy/yellen-says-us-afford-su...

ot 3y ago

Comparing the balance sheet fluctuations of a bank to its market cap is meaningless. Banks are extremely leveraged by their nature, BA has like $3T in assets and $2.8T in liabilities, so minor swings in assets value move the equity by amounts that are comparable to the market cap.

samspenc 3y ago
Thanks for this info, if I'm understanding this right, the current $131.6B in unrealized losses pales in comparison to their total 2.8T in liabilities (less than 5%). So even if they did have to sell all their bonds and lose all that money, it will account for less than 5% of their total liabilities and they would still be positive when calculating assets minus liabilities?
- ot 3y ago
  Yes, according to those numbers BoA is technically solvent.
jerf 3y ago
It does not follow from "Banks are extremely leveraged by their nature" that fluctuations in its asset value are meaningless. It is, right up until it isn't, and then it suddenly means everything. Which means it isn't meaningless at all. It's not like we live in a world where we've been banking for thousands of years without this ever being a problem. It was most recently a problem this year, and if your memory is fuzzy, it wasn't just Silicon Valley Bank. If you're going to excuse that away, then it was most recently a catastrophic problem in 2008, which isn't exactly "hasn't been a problem since the Roman empire" or anything. And if you're going to make excuses for the Global Financial Crisis and how that doesn't actually matter and doesn't need to be incorporated into anyone's models of how banks work, well, our world views are irreconcilably different. I can promise you the banks don't believe it's irrelevant.
- dmoy 3y ago
  Note GP didn't say "fluctuations in its asset value are meaningless", they said "Comparing the balance sheet fluctuations of a bank to its market cap is meaningless". For example US Bank has $50B market cap, $500B deposits, and closer to $700B total assets.

deleted 3y ago

[deleted]

RC_ITR 3y ago

>I immediately think about a run-on-the-bank. If I had my money there, and I read a statement like that, I'd be discreetly moving it elsewhere. Congratulations! Whether intentional or not, you're trying to start a bank run! Please don't! The reality of the matter is literally any bank could not survive a bank run. Even JPMorgan. The entire business model of a bank is to take deposits, hope people ask for them in a predictable way, and then lend them out to people (often as mortgages or Treasuries, but also as a lot of different things). It's a weird system, but it's what we got. What is happening here is that the resale value of treasuries fall as interest rates rise. This is due to the weird quirk of treasuries having a set payment schedule, which forces the face value to change in order to reach parity with market interest rates. The amount that the government owes BoA at maturity is still the exact same number. Nothing about those Treasuries has actually changed other than the fact that they earn less interest than a newly issued treasury and if BoA needed to sell them quickly, they would be worth less than what they were paid for. As you'd guess, this only becomes a problem when people run the bank and the bank needs to sell those Treasuries to meet deposit requirements. In reality, if BoA gets in trouble, since it is a GSIB, the US government would just spot the bank the original value of those Treasuries (since again, nothing about them has actually changed and the government still owes BoA the original price eventually), everyone would complain, and then we'd move on. Things will be a lot nicer if we don't have to do that, so please stop!

nemo44x 3y ago
> Nothing about those Treasuries has actually changed other than the fact that they earn less interest than a newly issued treasury and if BoA needed to sell them quickly, they would be worth less than what they were paid for. They bought them with money that isn't theirs and if they were to sell them all to return people's money then they would be bankrupt. So yes, a lot about those Treasuries has changed as the value of the asset is based on time and rate. Those Treasuries do in fact have a market price and although they'd return all their principal eventually, it isn't today and is actually a long time from today. It's completely disingenuous to say "nothing has changed". Nothing has changed other than the fact that the market value of the treasury is far less than what the bank could stand if forced liquidate them. Only a fool would keep any sort of serious money with BoA that isn't FDIC insured, etc.

unyttigfjelltol 3y ago

Compare to the Federal Reserve's own realized losses of over $100b[1] and recent articles pointing out that's actually an off-balance-sheet liability of member banks[2]. These aren't the Signature Banks and SVBs of the world and for that reason the concern on this board about what happens if the trend line extends still further-- it won't be. The concern really should be that this all represents a policy response that cannot be sustained, and so it won't be. [1] https://www.reuters.com/markets/us/fed-is-cutting-staff-after-more-than-decade-payroll-growth-2023-09-22/ https://www.reuters.com/markets/us/fed-is-cutting-staff-afte... [2] https://www.wsj.com/articles/the-new-bank-bailout-fed-member-district-banks-taxpayers-losses-b1b4735e https://www.wsj.com/articles/the-new-bank-bailout-fed-member...

landemva 3y ago
> this all represents a policy response that cannot be sustained, and so it won't be. Are you implying increased interest rates, as set by Federal Reserve, will not continue? Or that Federal Reserve plan to pump underwater bank UST holdings will be enough to make it all OK? "The Bank Term Funding Program (BTFP) is a lender of last resort facility. It was created in March 2023 ..." https://www.brookings.edu/articles/what-did-the-fed-do-after-silicon-valley-bank-and-signature-bank-failed/ https://www.brookings.edu/articles/what-did-the-fed-do-after...
- JumpCrisscross 3y ago
  > Are you implying increased interest rates, as set by Federal Reserve, will not continue? This is a recurring meme in Silicon Valley. To the point that I think executives at SVB believed it: that the Fed is constrained in raising rates by things like balance sheet losses or the interest cost of the federal debt. (It's not. It's constrained by job losses.)
  - landemva 3y ago
    SVB didn't care and had a C-level on board of directors of S.F. branch of Federal Reserve which was SVB's regulator. To clarify, I think it is likely increased interest rates will continue. Federal Reserve follows interest rates / inflation numbers, and war brings inflation.

deleted 3y ago

[deleted]

onlyrealcuzzo 3y ago

Good thing it's unrealized!

supportengineer 3y ago

Any consumer with $250k or under at BofA has nothing to worry about.

plonk 3y ago

What does a bank write if it's in a good place and the rumors are baseless? Or do you just leave the bank regardless of that to be sure?