Killer graphic from Branch Hill Capital:

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Source: Manal Mehta, Branch Hill Capital

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Is there something to Bank of America’s balance sheet worth thinking about ?

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What say ye?

Category: Credit, Derivatives, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

30 Responses to “Open Thread: BAC’s Accounting”

  1. “Is there something to Bank of America’s balance sheet worth thinking about ?”

    wow, Really?

    Sure, there’s ‘something’, it’s Everything.

    that ‘Bank’ has been Insolvent, since ’008, at the Latest..

    yon’ Ritholtz is, indeed, Correct..BAC should go to the USTreas, seek a ‘Pre-Pac’ (BK Re-org), and, have the Pieces ‘spun-out’..

    this, continuing, “TBTF”/”TBTB(ail)”, MSM-Trumpeted, non-Sense is, not only, Killing what’s left of the ‘Organic’ Economy, but, also, actively, promoting the Current, and Future, Enslavement of ‘Country’/World—by foisting their Losses onto the Public Ledger..

    see what Soros is ‘saying’ http://www.ritholtz.com/blog/2011/08/der-spiegel-interview-with-george-soros/ about ‘by foisting their Losses onto the Public Ledger..’, if you haven’t heard..

  2. stonedwino says:

    B of A = Broke…We have to go Swedish on them…no more bailouts in this political climate. This is going to be fun. Pass the popcorn please!

  3. Moss says:

    They never figured on all the Civil suits… maybe they thought TARP would cover up everything.

  4. Orange14 says:

    One thing is for sure and the other may or may not be. 1) Ken Lewis will go down in banking history as one of the most gullible fools ever; and 2) Brian Moynihan will become of hero if he can sort this whole mess out and save the bank.

  5. T_S says:

    Say what you want about mark-to-market, or mark-to-whatever, but the bottom line
    is currently bank balance sheets are opaque. Without some sort of clarity, this
    sort of thing will continue to happen. I imagine that only a handful of BAC actually
    know wtf is on with this stuff.

    I would think that it would be a spectacular confidence boost (hey a visit from the confidence
    fairy!, as Krugman would say), if we took one of these TBTF banks and went Swedish on their ass.

    I’m with stonedwino. Bust out the popcorn!!

  6. Rouleur says:

    …well said MEH…bondholders need to take their medicine in order for even the possibility of the developed countries to move on…can the “west” move on without the river of liquidity?

  7. Frilton Miedman says:

    I’m very nervous that this could hurt bonuses this year.

    Never mind all that petty stuff about fraud, scandals, ponzi’s and the like…if they can’t sustain astronomical bonuses, we might never see that trickle down we were promised by Heritage foundation, Freedomworks et a;l.

  8. AHodge says:

    latest nail in coffin–massively forbidden foreclosures a development certainly not foreseen my me a year ago. new news
    but 27 bio is chump change and not certain

    they have at least 70 bio of home equity and related untaken writedowns.
    also subtract everything else unmarked from the “capital” that moynihan crows about and the regulators accountants tacitly accept . by that i mean not “fire sale” what a laugh, but values that will never ever be seen again

    they live on if we keep payin, would not bet against that now

  9. louis says:

    Bryan Gardner

  10. budhak0n says:

    The bigger question is how do you punish all those wankers who went out and borrowed money they didn’t have and refused to pay it back.

    Our real problem stems not so much from the banks who issued all this trash. It stems from a credit system that rewards people for being total deadbeats.

  11. JasRas says:

    Inherited problems. Management lacking skill sets. A big loser (CFC) that has potential losses bigger than all the other divisions can carry. That is three strikes.

    BAC sells systematically all that is good and is left with of dog’s portfolio (you know the one, sell your winners, keep your losers….)

    That is all. It is a disaster. CDS are showing the vultures are circling. Frequent cheerleading internally that things are “all right”. Co-conference calls with Mutual Fund managers. Toast, toast, toast.

  12. theexpertisin says:

    Too big to fail.

    Too broke to succeed.

    Therein lies a dilema.

  13. Frilton Miedman says:

    No doubt that irresponsible lending was a contributor.

    However, the bulk of the financial crisis is attributed to fraudulently rated MBS derivatives and professional irresponsibility on the part of lenders.

    They intentionally pushed liar loans for the sole purpose of packaging CDO’s, default wasn’t the slightest concern because the taxpayer had their backs.

    To make this argument of professional liability vs home buyers, simply ask yourself how AIG’s parallel fraudulent ratings on CDS’s are connected to lenders irresponsibility.

    In the eyes of the law, a con man is the criminal, not the victim….even if the victim is somehow criminally stupid.

    Lenders were being sold a bill of goods on the idea their homes were all but guaranteed to appreciate rapidly enough to offset enough equity to refinance before the ARM kicked in.

  14. hack says:

    @budhakon

    Serious?

    Those that put money at risk through loans (or any other investment) are the one that have the burden of assessing whether it will be paid back with profit or not. If you lend money to someone that can’t pay it back (ummm . . . due diligence – first and second order/original loan and subseqent MBS) then you deserve to lose it if they don’t pay it back.

    BAC is suffering from a mess of their own making and they should suck it and we should quit paying for it!

  15. scottinnj says:

    I’m late to this, but why isn’t putting Countrywide into Chp 11 feasible? You’d have to assume BAC kept it ringfenced and that’s where the majority of the problems are.

  16. TrickStyle says:

    Whatever. I just bought a bunch of shares at $6.88. At that price, it’s like buying an option, one that is propped up by the USG. Like a Gazprom, or Petrobras. It was $15.00 in Jan ’11. Sure, my investment could go to zero, but there are plenty of forces that don’t want that and who have the power to see that it doesn’t happen. I once heard a semi-wise man quote a wise man who said, “do you wanna be right, or do you wanna make money.”

  17. slowkarma says:

    Yeah, BAC and Countrywide and opacity blahblahblah…and I have no doubt that there are many, many smaller tragedies out there. But I live in Pasadena and have friends in the Valley and a number of them were flipping homes, and ALL of them knew there was a possibility that they’d lose their chair if the music stopped at the wrong time. But the way they saw it, it was stupid not to take the super-cheap mortgages and then try to flip. Look, you start with zero, or close to zero, jammed in some crappy apartment in Van Nuys, no hope for buying a decent house anywhere in LA, and now Countrywide comes along and offers to let you lie…so you take it. The very worst thing that can happen is that you wind up in a crappy apartment in Van Nuys. But if it works out…ah, then you have some actual money in your hand. Go through three or for flips, and you can actually buy a house that you might be able to afford long-term…Them of course, the music stopped, but *everybody* I knew, knew that was going to happen. It wasn’t all, or even mostly, ignorant Okies fresh out of the rutabaga patch, getting sold by slick mortgage brokers…

  18. Lyle says:

    Ken Lewis is easy to explain he followed Hugh McCall who build up NCNB thru a vast number of mergers eventually absorbing BofA but keeping the more famous name (This is why the bank is headquartered in Charlotte). Now Ken just had to do big mergers to keep up with Hugh, but Hugh had pretty much maxed out the mergers on the Bank side. So Ken decided he wanted to be another Sandy Weil and create the vaunted financial supermarket that deluded bankers think is needed. So he bought Countrywide to become #1 in mortgages, not doing due diligence to look inside at the excrement that was sitting there all neatly wrapped up. Then he was talked into buying Merril Lynch as well (all though that was not quite as bad a deal). Kens desire to keep up with his boss and to be #1 in banking in the US proved to be his undoing.

  19. [...] Bank of America accounting question du [...]

  20. budhak0n says:

    @hack. DEAD serious… I own everything I have. Go ahead expound how somebody like me has benefitted from the outrageous behavior in the “market” these past 3-4 years.

    I know , I know, I’m the idle rich and don’t really count.

    Here’s your problem folks. Reward without risk. Now the message to EVERY single guy who goes out every week and busts his hump for 40-60 or 70 hours is that the game is rigged.

    Why should I pay my creditors? They don’t pay anybody anyway. And the domino effect is precisely what is devastating this economy and has this country stuck in a perpetual merry go round of blame game.

    Man up. Move on.

  21. number2son says:

    slowkarma, and your point is what exactly?

    budhak0n, exactly. An economy in shambles does not discriminate in who suffers damage. Including those who have carved out little islands for themselves and were sensible enough not to participate in the madness.

  22. ZackAttack says:

    They’ve been “weighing a foreclosure deal” for months now. Press release plant.

  23. DasKapitalist says:

    Can someone validate to this layperson the argument Meredith Whitney put forth last week on CNBC that BAC was undervalued because it is trading at half of its tangible book value? I’m assuming the strength of this assertion depends on the malleability of TBV.

  24. jritzema says:

    In put-back reserves they are also assuming a 3% decline in housing prices this year and a 1% increase next year.

  25. rktbrkr says:

    Countrywide is a separate legal entity that can be deep sixed and will be deep sixed eventually which may save BAC a trip thru FDIC.

    It will get interesting when FDIC starts unloading large numbers of mortgages when they liquidate CW, it could really knock home values down a couple more pegs in the areas where CW was active.

  26. rktbrkr says:

    time to burn the furniture

    Bank of America Corp. (BAC), the largest U.S. bank by assets, is in talks to sell real estate investments held by its Merrill Lynch unit to Blackstone Group LP (BX) for as much as $1 billion, said a person with knowledge of the matter.
    The assets include properties in Europe, the U.S. and South America, said the person, who asked not to be identified because the negotiations are private. Bank of America in July 2010 hired Blackstone to manage Merrill’s Asian real estate investments while retaining ownership in what was a $2 billion private- equity fund.

  27. Frilton Miedman says:

    @ budhak0n

    “Here’s your problem folks. Reward without risk”

    The RISK of being an American, among others, is the risk of being called to fight for your country, effectively I could die fighting for your right to own what you own versus a Communist or Fascist form of domain. (we’re arguably bordering Fascism at this stage anyway)

    The REWARD, equality, a reasonable level of expectation that the basic life and death needs of every American won’t be denied…. specifically if that American is only asking for the chance to EARN and PAY for these things.

    For further elaboration you can find the detailing of who, what, how and why Congress can tax under “Powers of Congress” in the U.S. Constitution”.