Bank of America: Why All the Hate? (BAC, JPM, WFC)

Bank of America: Why All the Hate? (BAC, JPM, WFC)

Bank of America is despised for its mortgage division. But savings deposits are not very safe, since derivatives are first in line for any FDIC insurance payouts. They are 65 trillion dollars leaving no money for any depositors. So, while it is unlikely that the derivatives go bust, there is always the possibility that they could.

If interest rates were to rise, and it is unlikely, the derivatives would go bust, and  the FDIC would pay the counterparties first, and those with FDIC insurance would likely lose. Those with more would likely see much of their savings wiped out. Again, the scenario is unlikely, but Bernanke treats bank depositors like crap for putting the derivatives first in line for the insurance.

Just remember, when you deposit money in the bank, you are loaning the bank money, and technically, the money is not yours, but belongs to the bank as long as it is in the bank. Just FYI.

Kind of makes you feel warm and fuzzy all over, right?

Comments

  1. Gary, I didn't know that derivatives come before savings - that's insane. Great piece as always.

    ReplyDelete
  2. Hey Judge, unfortunately it is true. It has been said that Bernanke would remove this by 2015. I would not hold my breath.

    Thanks for the comment.

    ReplyDelete

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