2011/03/09

Bank of America Breaks Itself Up?

Big story about a partial reorganization at BoA.  Many people have commented today, Felix Salmon among them.  There are a lot of different elements to this story, but I find one of them particularly interesting.

Yves Smith raised this point.  Namely, it almost appears as if BoA is preparing itself for resolution.  When people were debating how to deal with our criminal, oligopolistic Too Big To Fail banks in early 2009, many people (myself included, although not online) were calling for a good bank/bad bank approach as was used in the US during the S&L crisis and in Sweden during its financial crisis.  The depository portions of the bank and the remaining performing assets would be carved off by a trustee and sold back to the private sector.  The bad assets would either be termed out or discounted steeply enough to find buyers.  This approach, which would have been a temporary nationalization of much of our financial sector, would have been the fastest and most absolute way to deal with the mountains of toxic assets accumulated by our criminally irresponsible banks.  Now, BoA is going to split off large portions of their non-performing assets into a different internal division.  That certainly would make it easy if BoA were eventually going to be resolved under Dodd-Frank.  Yves' analysis is worth reading in its entirety; she raises some other interesting points.

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