BofA moves derivatives from Merrill to an insured subsidiary - a symptom?

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Which essentially means another tax payer funded bailout?

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How much of FDIC insurance is paid by the banks themselves vs straight from the taxpayers?

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How much of FDIC insurance is paid by the banks themselves vs straight from the taxpayers?

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And they are wanting to be insured immediately without having paid any premiums. Although the issue should rest solely on the legal definition of what is an insured deposit.

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100% comes from the banks.

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Doesn't the FDIC basically have a line of credit with the Treasury?

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Yeah, so?

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So BoA's derivative swap (estimated to be $53 Trillion) to an FDIC insured accounts (or whatever the technical term is) puts the risk on the lender to the FDIC, the Treasury (i.e. taxpayer).

I don't see why the FDIC simply can't say no to this?

The notional value of derivatives is misleading and only impresses uninformed people not familiar with finance.

I read the article and it's clear the author has no clue what he's writing about. He doesn't even go into a breakdown of the derivatives. They could all be interest rate swaps, for all we know, and the risk of loss on those compared to their notional value is miniscule, especially in the current interest rate environment.

Don't go all Drama Queen on us. Leave that to Toddy on the Poli Board.

Its not like derivatives are fdic insured anyway. Put them in whatever opco you want, if the holdco declares bk derivative counterparties are first in line. I really hate the notional reference, its an absolutely meaningless number. Its like saying Michael Ford ran for 300 feet in a win against X.

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I really hate the notional reference, its an absolutely meaningless number. Its like saying Michael Ford ran for 300 feet in a win against X.

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It's actually more akin to saying "offense X ran plays with a notional value of 3500 yards" while ignoring the fact that extreme success on any given play is very unlikely, which is why that same offense only actually GAINED 350 years.

Sure you can. In theory, any play run from your own 1 yard line has a "notional value" of 99 yards. Just like a $100M IR swap you and I enter into against each other at 4% has a notional of $100M. But in reality, the prospect of actually collecting those 99 yards/$100M (i.e. the full notional) is highly highly unlikely. Sure, the offense might run for 5 yards. And sure, rates might go up several hundred basis points. But that doesn't change the fact that the notionals wildly overstate the risk.

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If the FDIC borrows from the Treasury, which it has several times in the past, it either raises the deposit insurance premium banks pay or assesses a special assessment which the banks pay to pay off the loan.

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The last I checked $3.9B in the FDIC fund is inadequate to cover $6.5T in insured deposits no matter how it is spun. BAC has > $1T in deposits per the article. The FDIC fund currently is at .06% reserve ratio level when historically it has been 1.35%, no matter how you view it is a very weak form of insurance given the fact that even reputable banks are tired of paying for the sins of crooks/bad mgt at TBTF institutions. Last I saw the FDIC had a $100B line with the Treasury. Say BAC fails and member institutions can't/won't pay grossly inflated assessments or premiums, the the T line is eaten through, then the taxpayers are the last line of defense. Is BAC ever going to be weaned from the teats of FDIC member institutions and taxpayers?

FDIC stats

In case anyone didn't get the memo, I hate f'n BAC and everything it represents although I don't feel this way about the majority of the industry. WTF has this company done for past shareholders that they f'd over while collecting their bonuses?