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

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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?

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and member institutions can't/won't pay

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This is what I always say, but he and other commentators seem reluctant to concede the point. At the high point of the crisis, the treasury line to the FDIC was upped to $500 Billion.

I see it as analogous to all the people that denied for years that Fannie/Freddie had a government backstop.

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The collapse of Long Term Capital Management (“LTCM”) in Fall 1998 and the Federal Reserve Bank’s subsequent efforts to orchestrate a bailout raise important questions about the structure of the Bankruptcy Code. The Code contains numerous provisions affording special treatment to financial derivatives contracts, the most important of which exempts these contracts from the “automatic stay” and permits counterparties to terminate derivatives contracts with a debtor in bankruptcy and seize underlying collateral. No other counterparty or creditor of the debtor has such freedom;

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So, in a SHTF situation the counterparties are ahead of the depositors?

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