$118 billion of toxic assets, were back stopped by the Government, in the "merger" of Merrill Lynch with Bank of America. Now we find out that Bank of America threw in $29.5 billion of it's own "legacy" toxic assets.
So BAC pulled a Maiden Lane, just like JPM did when it bought Bear Stearns. JPM had the first $29.5 billion of Bear's most toxic assets given to the Fed, under Maiden Lane. (This portfolio has a fiction valuation of $27 billion on the Fed's balance sheet.) JPM continued this fantasy, by acquiring WaMu, and then right after WaMu wrote down $32 billion of their assets. WaMu's accounting gimmick of a one time gain of $1.3 billion dollars is what gave JPM the profit for the quarter for it's so-called "fortress" balance sheet.
Bank of America maintains it went back to the government for more support because of larger-than-expected fourth-quarter losses at Merrill Lynch and that the problems came to light after shareholders approved the Bank of America-Merrill combination on Dec. 5. But 25% of the protected asset pool belonged to Bank of America, Chief Financial Officer Joe Price said Friday, a signal that the problems weren't tied strictly to Merrill's disintegration.
Now Merrill Lynch assets supposedly cratered another $15 billion in the quarter. Their excuse?
Merrill lost $15.3 billion during the period, and the run-up in losses was concentrated in the firm's sales and trading department, run by Tom Montag, who was hired by Mr. Thain in 2008 to run that division. The two frequently told the firm's other top managers that the losses, while significant, were largely connected to so-called legacy positions at Merrill and the losses were "market-related" and not out of step with Wall Street.
Now does anybody remember the ballyhooed Mr. Montag who was responsible for this $15 billion loss? This "brilliant" hiree was hired from Goldman Sachs, for a $50 million pay package.
So BofA pays someone $50 million, to lose $15 billion, and then Bank of America sticks the taxpayer with the bill.
Now we will have Maiden Lane IV. Maiden Lane II is the $19.8 billion of AIG dreck, while Maiden Lane III is the $29.8 billion of AIG dreck that helped bail out Goldman Sachs, that sits at the Federal Reserve. The Fed has a "fantasy" valuation on all their holdings called "fair value" pricing. The "fair value" pricing is the subsidy that the Investment Banks, and the "Fortress" banks, have gotten from the Federal Reserve, which is the "sub rosa" Maiden Lane TARP.
Why else would all the banks clamor to buy Bear Stearns, or a Merrill Lynch, or a Washington Mutual?
They want the Fed to subsidize their purchase, and then they want the taxpayer to bail them out!
When the Fed didn't subsidize their purchase, you get Lehman Brothers! Dreck that no one wanted because the Fed wouldn't backstop the purchase. But they still got paid, courtesy of you! The bankruptcy gave the shareholders nothing shareholders, and the bond holders got raped, and the the banks got paid, but this time the the subsidy went to the Investment Banks and Brokers courtesy of AIG, of which the same scoundrels purchased the swaps from, of which the Fed back stopped, of which, you the taxpayer paid for, of which the same now rests as Madiden Lane II and III on the Federal Reserve's balance sheet!
Now courtesy of Ken Lewis, we'll now have Maiden Lane IV, and the Ken keeps his job, and the taxpayer pays his bills.
And his top trader, Tom Montag, hired from Goldman Sachs for $50 million, outside of the loop of "Government Sachs" oversees a $15 billion dollar loss at Merrill, but the overseer of the losses just says that the issue is "legacy" assets.
Don't traders trade? So "babysitters" at Bank of America get paid $50 million to watch the train wreck of their assets implode? No wonder John Thain wanted a $10 million dollar bonus. He was the babysitter's agent!
Ken Lewis' and John Thain's legacy is that they babysitted BofA and Merrill Lynch while it imploded, and their shareholders got raped.
It looks like they were more concerned about retention bonuses and salaries than they were about running the business.
Now Maiden Lane will be the repository for the storehouse that never was, just like it was in the 1920's.
And if you are a bettor, the odds of this "maiden" getting a call in this horse race is about the same, that these destroyers of capital will be put out to pasture.
They only do that to maiden horses!
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