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Chris Whalen: "We Understand Bank Of America's Problem - They Are Completely INSOLVENT!" (Video)

Video - Chris Whalen - Recorded Dec. 8, 2010

Much to absorb, though it's not entirely new material if you follow Whalen.

  • "We understand what the problem is for Bank of America.  They are insolvent.  They still have huge losses to take on their mortgage book, and balance sheet.  They also have to deal with everyone wanting them to buy-back mortgages."
  • "By this time next year the majority of home sales will be involuntary - more foreclosure sales than normal sales."
  • "We haven't seen the peak of foreclosures yet.  That will come 12 months from now."
  • "California will default on its debt."
  • "A whole slew of sovereign defaults in Europe.  There is no growth."
  • "QE and QE2 are just hidden subsidies for the big banks." 
  • "Bank of America is in the worst shape of any U.S. bank."
  • "Bank of America senior bondholders will have to take a hit, convert debt into equity."
  • "There is no doubt they will have to be restructured."
  • "Ireland is small.  Wait until we get to Spain."


Read more on this interview here...


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Reader Comments (20)

Whalen: Foreclosure Peak Still Ahead for US


Many more quotes in here from the clip...
Dec 7, 2010 at 3:01 PM | Registered CommenterDailyBail
Mounting state debts stoke fears of looming crisis

Dec 7, 2010 at 4:05 PM | Registered CommenterDailyBail
Home Prices Are Still To High - Peter Schiff on CNBC 12/06/10

Dec 7, 2010 at 4:06 PM | Registered CommenterDailyBail
The ONLY solution is: KILL the Fed. All other talk -- spending cuts, etc. -- is nonsense.
Dec 8, 2010 at 8:05 AM | Unregistered CommenterEamon
Here's the bailout pecking order, as seen by Moody's:

1) Financial companies

2) State governments

3) Non-financial companies

"This October, Moody’s issued a report explaining why it now rates all 50 states, even Illinois, as better credit risks than a vast majority of American non-financial companies."

"One reason: the belief that the federal government is more likely to bail out a teetering state than a bankrupt company. "

This is from well inside the MSNBC/NY Times article in DB's top link:


Another "fun fact".

" And, according to a recent study, the City of Chicago's unfunded pension liabilities total $45 billion, or more than $40,000 per household. "


And that's just Chicago's share. The total liability for the entire State of Illinois continues to grow:

"The Pew report found that as of the mid-2008, Illinois had funded just 54 percent of what was then a $119 billion obligation to its public employee pension funds. And that may understate the problem. A more recent estimate from the legislature’s bipartisan fiscal watchdog agency pegged the funding ration at a hair under 50 percent by the end of last June."

"Pew also said that Illinois had set aside less than 1 percent of the funds it need to pay for $40 billion in health care and other benefits promised public sector retirees. "


So roll up your sleeves, America! Your bankers and payrollers need you!!
Dec 8, 2010 at 9:12 AM | Unregistered CommenterFrank
Billy Joel has a new girlfriend. She's a Senior Risk Analyst at Morgan Stanley. She's a 29 year old Senior Risk Analyst at Morgan Stanley.

Shouldn't Senior Risk Analysts have enough seniority to remember when Billy Joel had a hit song? Shouldn't they remember the olden days when ultimate risk meant, not bailout, but bankruptcy?


Where does Morgan Stanley get it's Junior Risk Analysts? High School?
Dec 8, 2010 at 9:57 AM | Unregistered CommenterFrank
Wikileaks To Take On Bank Of America

Amidst the news surrounding the sensitive diplomatic information released last week, Wikileaks head Julian Assange hinted that he would be releasing documents from a major financial institution. The Onion has been granted special access to these documents, and is proud to present some of the more damning revelations about Bank of America:

Dec 8, 2010 at 12:10 PM | Unregistered CommenterFrank
frank..i sent you an email...check your spam folder if you don't get it...
Dec 9, 2010 at 12:02 AM | Registered CommenterDailyBail
frank...great job with the links by the way...
Dec 9, 2010 at 12:03 AM | Registered CommenterDailyBail
I don't understand how someone like Chris Whalen, who is so focused on debt problems, can suggest that the Bush tax cuts should be extended. Revenues coming into the government are near historical lows in large part because of very low tax rates. Debt isn't just caused by one side of the ledger, the spending side. It is also caused by a shortage of revenues. Extending the tax cuts only makes the debt problems much worse over time. Extending the Bush tax cuts would add $4 trillion to the national debt in the next decade. If debt is a concern, the Bush tax cuts should be completely eliminated, not even partially extended.
Dec 11, 2010 at 8:16 PM | Unregistered CommenterPermabear
I called this 5 months ago. It's about time people started paying attention.
Dec 12, 2010 at 2:37 PM | Unregistered CommenterSteve Dibert
@steve...nice job...i and others have been writing the same for 24 months...
Dec 13, 2010 at 5:36 AM | Registered CommenterDailyBail

nice observation...whalen approaches tax cuts from the economic growth angle...and he criticizes the GOP for not delivering on spending cuts...still, from my standpoint, i think it's wrong to support the tax cuts unless the spending cuts come with the package...paul ryan and the gop has lost me here...
Dec 13, 2010 at 6:00 AM | Registered CommenterDailyBail
"Ireland is small. Wait until we get to Spain."

Actually the liability of Ireland is almost as large as that of Spain (80% or so) in spite of being ten times smaller as a country (source: BIS - http://www.bis.org/publ/qtrpdf/r_qt1009.pdf#page=19). The problem with Spain is that its real economy, in spite of the real state bubble amounting to 12% of GDP (http://forwhatwearetheywillbe.blogspot.com/2010/12/persistent-real-state-bubble-in-spain.html), is indeed much larger and holds a significant fraction of the EU's citizens and GDP, being also a much more influential state (even if it's less influential than its ranking as maybe 13th largest World's economy, above Canada, could suggest). Spain is also the most exposed country to a possible collapse of Portugal by far.

So if Spain (or even worse: the UK or Italy) goes awry, EU economy and social stability should suffer much more than for what has happened so far with Greece and Italy and the absurd Union-wide budget cuts (that make labor costs higher, not cheaper).

In any case, I would be much more worried (from a global perspective) because of these:

"California will default on its debt."

That's truly scary, California is said to rank 9th in the Global economy and is a true engine of US economy. The European rough equivalent could be a German default (not likely yet) or a British default (much more likely).

"... There is no growth."

This is the crux of the matter. No growth means no (new) markets and therefore much increased competence between companies and even states for the remaining markets, causing many to collapse, what can only spiral uncontrollably in such a globalized economy.

More broadly it means a crisis of overproduction, a structural crisis of dimensions not known since the 1930s.

However I am sceptic that growth can be sustained, because modern economics, more a faith than a science, fail to account for so many components, particularly but not only ecological damage (which is a major cost unaccounted for), that an economy of growth (as Capitalism must be) is probably not sustainable (and here financialist economics can only fail to understand the whole picture because it lacks the tools).

So we need a new paradigm, a paradigm in which growth (and of course financialization) is not so important.
Dec 28, 2010 at 6:14 AM | Unregistered CommenterMaju

Are you short BAC? It seems like a slam dunk except Timmy's and Benny's secret promises. Could they find a way to bury the obvious or create a "national emergency?"
Jan 20, 2011 at 8:58 PM | Unregistered CommenterOberon4life
oberon..that's the worry...and no i'm not short bac or anything else at the moment...and i'm not long anything either...after getting it right in 2007-8, i've been wrong since march of 2009...i didn't see the rally lasting this long...

back to bac...yes, it seems like a slam dunk but fannie already gave BAC a sweetheart deal in the settlement for fraudulent mortgages that was announced last week...and you know that was influenced by geithner....

bac is insolvent many times over...but they are also protected....so i'm not sure they end up being restructred/nationalized as whalen and some others think...i imagine they will be allowed to earn their way out of the insolvency problem over the next decade...essentially what we did with all the insolvent money center banks in the 80s...we gave them time to heal their balance sheets...
Jan 21, 2011 at 3:41 AM | Registered CommenterDailyBail
@Oberon, here are the distractions.

Senior Citizens busted in backroom playing penny ante:


Note: they went after the wrong "mafiya" and will tie up the msm and courts until they are too broke to prosecute or investigate the mortgage fraud etc..


Lond dead entity recorded on tape during an Ouija Board session:


I can't wait to see what else crops up.
Jan 21, 2011 at 8:44 AM | Unregistered Commenterjohn
oops, should be LONG dead entity.

Jan 21, 2011 at 8:46 AM | Unregistered Commenterjohn
Some Bank of America customers unhappy over transition to Camden National



Camden National Bank will take control of 15 Bank of America branches in three counties on Friday afternoon, as well as 38,000 associated customer accounts.

While it’s a strategically important acquisition for Camden National, making it the fourth largest bank in Maine in terms of deposits, not all soon-to-be Camden National customers are happy their BofA accounts were sold without their consent.

Camden National will take control of about 38,000 customer accounts belonging to roughly 30,000 customers. Those savings and checking accounts include approximately $300 million in deposits, as well as $10 million in loans, said Gregory Dufour, Camden National’s CEO.
Oct 26, 2012 at 7:08 AM | Unregistered Commenterjohn

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