Thursday, July 16, 2009

Bank of America - Secret agreement?

So much for transparency. From the WSJ:

Bank of America Corp. is operating under a secret regulatory sanction that requires it to overhaul its board and address perceived problems with risk and liquidity management, according to people familiar with the situation.

Rarely disclosed publicly, the so-called memorandum of understanding gives banks a chance to work out their problems without the glare of outside attention. Financial institutions that fail to address deficiencies can be slapped with harsher penalties that include a publicly announced cease-and-desist order...

Bank of America faces a series of deadlines, some at the end of July and others in August, these people said.

The company might get more time to complete some of the steps it is taking, such as reconstituting its board with a majority of new directors. Since early June, Bank of America has named four directors to its 16-person board, leaving the bank considerably short of the government's requirement....

Citigroup is in the same trouble as BofA. This type of rumor causes bank runs. This tells me that there is no question that BofA and Citi are absolutely insolvent companies. The gov't is trying to backstop them so they can earn their way out through incredible fees and trading spreads. This is messed up. I will be closing my BofA accounts this month and I would suggest others to do the same instead of supporting the taxpayer pillaging that is being enabled by the Feds.

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