Bank of America could go tits up…

The situation is fluid for Bank of America right now, but it’s also very tense. Their credit has… ahem “signaled a junk ranking” on October 13th. Now, what happens next is really the fascinating part of the machine, the media will come in and savagely denunciate the company for the sake of bien-pensant, spell out doom and gloom while being curiously silent on accountability… but they’ll be sure to put a high ranking government official on standby to contain the real fallout: a clear danger of a bank run on Bank of America (I’m not that clever, I just remember the script from 2008). From BLOOMBERG (*spit*):

‘Political Implications’

The cost to protect Bank of America’s debt for five years climbed for a fourth day, touching yesterday’s record of 205 basis points, according to Phoenix Partners Group. The difference between the swap price and the average of the five largest banks grew yesterday to 41.1 basis points, the most on record.

Citigroup’s swaps rose 3.2 basis points to 177 today and contracts on New York-based Morgan Stanley fell 2.2 basis points to 173, Phoenix data show. In February, Citigroup’s contracts were 94.4 basis points higher than those of Bank of America’s, according to CMA.

“For all of these residential real estate issues that are dominating the headlines today and have significant political implications in the 19 days going into the election, Bank of America sits there more exposed than Citigroup right now,” Nomura’s Havens said.

Implied Ratings

Prices on Bank of America’s credit-default swaps imply the debt is ranked Ba1 as of Oct. 13, five levels below its actual A2 grade, according to Moody’s Corp.’s capital markets research group. That’s the first time the firm’s swaps have signaled a junk ranking since May 6, the data show.

Bank of America’s $2.5 billion of 4.5 percent notes due in April 2015 fell 0.381 cent to 103.89 cents on the dollar as of 11:36 a.m. in New York, Trace data show. The bonds were issued at 99.9 cents in March to yield 215 basis points more than Treasuries. The bank has $360 billion of bonds outstanding, Bloomberg data show.

The collapse of 2008 showed us bank runs happen online now. Large businesses could already be moving assets by the time you happen to read this. I doubt there is a bailout large enough to contain a BofA collapse. I don’t even bank with them and I’m betting I’ll feel the shockwaves if the behemoth falls down and Citi (who I also don’t bank with) gets to try and pick up the pieces.

But honestly, they’ve been failing hard for a while now. They have a special kind of contempt for customers that should have spelled their demise a long time ago. I won’t be sad to see the Bank of America name gone from the face of the earth. Let big bad, mismanaged companies fail and die for fucks sake, especially banks. The sky will not fall.

posted by vforvandyke
  • g4lt

    couldn’t happen to a nicer bank. When they have a fee that is literally everything you have in the bank, you know they need to go down.

  • g4lt

    The loss they’re eating is a one-time writedown of $10 billion because of the new debit card laws preventing most overdraft fees of what is supposed to be an instantaneous transaction. Basically, they projected that they’d receive 10 billion in fees that were made illegal over the next five years. Why? because the free market isn’t even close to being free, and the deck’s stacked against you.

  • http://leftwingnutjob.blogspot.com Dusty

    Can I use the Ken Lewis graphic, with proper attribution of course? Please advise.