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« Henry blodget is appropriately outraged | Main | CITI WILL NEVER STOP ASKING FOR YOUR MONEY. EVER. »

Bank of america jealous citi was getting all hank's attention

The WSJ is reporting tonight that Bank of America is close to announcing a $20 billion infusion from the Treasury.  It appears that BofA approached Treasury in mid December because of larger than expected losses at Merrill Lynch.

According to the WSJ story, Lewis told the Treasury that he needed some help in order to close the deal for Merrill.  Something about Merrill's larger than expected fourth quarter losses, blah, blah, blah.

We call bullshit.  From the moment he agreed to take Thain and Merrill to bed, Lewis was looking for his move.  He wanted a taxpayer backstop but waited for things to get worse.  He was smart enough to know that a request for a big chunk of your money would not have been digested well on the same weekend that Lehman was left to sputter into bankruptcy.  So he waited.  Then Citi's near collapse at Thanksgiving showed him the government's new hand.  And she was pretty with a huge rack.  How's this sound for a deal: $20 billion plus a backstop for $300 billion, in exchange for less than $30 billion in preferreds and warrants. 

Then a few weeks later, Merrill's numbers were out and he had his chip. Fly to Washington on the corporate jet and inform the Treasury that, without assistance similar to Citi's deal, you won't be able to close the deal.  Taxpayer fleecing 101.  

Here's how it's being spun:

Discussions over these funds began in mid-December when Bank of America approached the Treasury Department. The bank, already the recipient of $25 billion in committed federal rescue funds, said that it was unlikely to complete its Jan. 1 purchase of the ailing Wall Street securities firm because of Merrill's larger-than-expected losses in the fourth quarter, according to a person familiar with the talks.

Treasury, concerned the deal's failure could affect the stability of U.S. financial markets, agreed to work with the Charlotte, N.C., lender on the "formulation of a plan" that includes new capital from the $700 billion Troubled Asset Relief Program, according to the person familiar with the talks. The amount and terms are still being finalized, this person said. Details are expected to be announced with Bank of America's fourth-quarter earnings, due out Tuesday.

Any possible arrangement might protect Bank of America from losses on Merrill's bad assets. There would be a cap on the amount of losses the bank would have to absorb, with the federal government being on the hook for the remainder, said one person familiar with the matter.

Both the Federal Reserve and the Federal Deposit Insurance Corp., alongside the Treasury, are involved in the negotiations, say people familiar with them. That suggests that the aid could take a similar form to the hand extended to Citigroup Inc. late last year.


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Reader Comments (8)

Good post. I can't believe all the garbage going on. What makes it worst is that the new crew seems to be cut from the same cloth.

Jan 15, 2009 at 1:51 PM | Unregistered CommenterJohn

I'm having a dream: I'm Hank, and Kenny Boy comes to see me with his blackmail. Here's the conversation:

Ken: I need 20 B now.
Hank: What the hell for? Already gave you 25 B.
Ken: Merrill had too much losses and I ain't absorbing that.
Hank: Really?
Ken: Really; otherwise, I'm walking away form the deal.
Hank: [muttering in deep thought] Hmmm! That wouldn't be good...
Ken [interrupting] You bet it wouldn't! System's still fragile and you don't want instability right now, now, don't ya?
Hank:...for you.
Ken: What?
Hank: I said "That wouldn't be good for you"
Ken: WTF??
Hank: Here's the deal! You walk away, we buy ML. However [cutting Ken with a gesture] we will also send a SWAT team of accountants to your place; [shrugging shoulders] No choice man! If BofA is so weak that it can swallow ML, what am I supposed to do?
Ken: [very pale by now] ARE YOU SUGGESTING...?
Hank: Well...duh! The SWAT team get there on Friday evening, peels off the books, and by Monday morning you're in receivership, asshole! You and your friends are outta there, stuff the golden parachute where it belongs, shareholders are kaput, bondholders take a good haircut, and we scrub your crib real clean. Once this is done, we sell to investors who shall be too happy to buy a big bank with a clean slate.
Ken: [thunderstruck and unable to articulate a word] hmmph!
Hank: You were saying? No questions? Alright then...you may go now.

One can always dream a bit, no?
*evil grin*

Jan 15, 2009 at 3:48 PM | Unregistered CommenterFrancois

nice of everyone to stop by and big thanks to those who have already posted below...i've had about 150 different people pay a visit today, and that was from just mentioning the site in 2 posts in the comments section on clusterstock...the post was henry's first take on the BAC bailout part deux...

the site is definitely not ready yet and while scrambling to make it so, i realized that i have no choice but to go ahead and soft-launch it now...so, soon the site will be reachable at www.dailybail.com or just dailybail.com...

the .squarespace tag will drop off...it will slowly gain a more professional look...

the content is what matters and it dictates that i start NOW...this entire week and likely all of next week are going to be very content rich ...and with so much happening each day, it would be a mistake, i think, to allow the inconvenience of an un-finished site to stop me from doing what needs to be done...and that, simply is to provide a news aggregation source for all stories related in any way to this messed-up, painfully inept and completely counter-productive bailout of failed people, businesses, municipalities, states and ultimately as all of us here know, our federal government...

it's gonna be a painful journey on a path to hell...but with your help we can keep each other company while we fight like crazy to wake up our fellow taxpayers to the great fleecing that is now, deeply upon us...

huge thanks to anyone who stops by during this soft launch period...and it would be great if you posted your thoughts on a story or just the bailout in general...

we love rants and all people who make them...show us what you got...

thanks a ton, DailyBail

Jan 15, 2009 at 8:32 PM | Registered CommenterDailyBail

I just wasn't firsty enough.


Jan 16, 2009 at 2:13 PM | Unregistered CommenterSPODE

well done francois...

today's bailout developments have me a little pissed off...

you will see it later in my posts...

Jan 16, 2009 at 2:31 PM | Registered CommenterDailyBail

part of my frustration is that obama seems to be staying the same course as charted by bush and paulson...

choosing geithner implies that we'll be handling the various bailouts in just about the same manner as we have seen for 12 months now...

which means the taxpayer loses...or perhpas more succinctly, the taxpayers' children and grandchildren are the real losers...

when will we see someone make some noise on their behalf in washington...?...

Jan 16, 2009 at 2:48 PM | Registered CommenterDailyBail

what i would like to see on your site is a dance.

invite lots of financial derivitive specialists. and just plain ol bankers who pinched noses, slammed maker's mark, and joined the gang rape of Everyman. play disco music. spread coke.

then let in a hoard of pissed-off 18th century french revolutionaries.

provide free viewing. transparently. french fry?

Jan 18, 2009 at 5:46 PM | Unregistered Commenterjohnmarshall

Who woulod have ever thought banks as large as citigroup and bank of america were so worthless. I had no idea they were in this much trouble. Doesn't it seem strange that none of them have lost their jobs. How is that possible?

I just found your site through TechCrunch. Someone mentioned it in the comments section of an iphone story. I like it. I like that you have no advertising. lol

I am a single mother with 2 young sons and I work in the tech industry in california. Our state is facing a large budget shortfall this year and we have been asking Washington to bail us out and I think it's wrong. The politicians in our state would rather look to Washington to cover our budget shortfall than actually look at the reasons for our shortfall. Yes, revenues are down this year becaue of the slowdown, but the true issue is bloated stae budgets, and health care and pension benefits that have been promised to public workers.

In vallejo which filed for bakruptcy in 2008, there were 42 police and firefighters earning in excess of $200k per year. Are you kidding me? For public employees, this is unreal. And these employees will receive 90% of their salary in the form of a pension for every year for the rest of their lives. And we, the taxpayers of california have to pay for their excesssice packages.

And if Washington just bails out all these states that are in trouble, then these states will never be forced to cutback their spending. And these bloated state salaries and pensions well never be corrected.

It makes me very upset when I think about.

update: i am posting my thoughts about the state bailouts in all the comment's section.

Jan 18, 2009 at 6:07 PM | Unregistered Commenterno more state bailouts

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