Dodd-Frank, BofA, and Derivative Risk Shift

A discussion between rootless_e and me about how story has been framed around Bank of America's shift of derivative risk to an FDIC-insured subsidiary.
financialization derivatives FDIC bofa CDO
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Karoli @Karoli 22/10/2011 22:36:40 WIB
@rootless_e I guess I’m not seeing what you’re objecting to. @DesertBeacon wrote on this too. shifting risk to FDIC is pretty detestable.
part imaginary @root_e 22/10/2011 22:37:34 WIB
@Karoli Because 10 minutes research shows that Dodd-Frank resolution authority allows FDIC to dump derivatives on "bridge bank"
Karoli @Karoli 22/10/2011 22:38:28 WIB
@rootless_e wherever they land, don’t you see that level of derivative risk as something taxpayers shouldn’t be covering?
part imaginary @root_e 22/10/2011 22:39:27 WIB
@Karoli I do, that's why Dodd-Frank allows FDIC to dump that obligation
part imaginary @root_e 22/10/2011 22:40:18 WIB
@Karoli They have 24 hold when resolutin starts, and they can move crap to a "bad bank" and separate it from the good bank
Karoli @Karoli 22/10/2011 22:41:33 WIB
@rootless_e ok, that’s fine. but the point of the story was BofA shifting risk, which I think is worthy of a post.
part imaginary @root_e 22/10/2011 22:45:06 WIB
@Karoli but it (a) does not explain that the Dodd-Frank bill explicitly addresses this and (b) doesn't explain what "notional" means
part imaginary @root_e 22/10/2011 22:45:49 WIB
@Karoli So the true story is that the Dodd-Frank bill, passed by Obama and the Democrats, allows the FDIC2 toss the derivatives in the trash
part imaginary @root_e 22/10/2011 22:47:51 WIB
@Karoli So there may be reason to be concerned, but relaying Black's bullshit is just ignorant fear mongering.
Karoli @Karoli 22/10/2011 22:48:36 WIB
@rootless_e so your issue with it is her choice of article to quote?
part imaginary @root_e 22/10/2011 22:49:11 WIB
@Karoli My issue with it is that people who relied on her for information would be Fox news level deceived.
part imaginary @root_e 22/10/2011 22:49:11 WIB
@Karoli My issue with it is that people who relied on her for information would be Fox news level deceived.
part imaginary @root_e 22/10/2011 22:50:08 WIB
@Karoli She says that taxpayers will be stuck with the costs - but Dodd-Frank specifically addresses that. So she was bullshitting.
Karoli @Karoli 22/10/2011 22:51:23 WIB
@rootless_e part of the problem here is the complexity of both the issue and D-F. I’m not entirely clear on how this works either.
Karoli @Karoli 22/10/2011 22:51:53 WIB
@rootless_e one of the reasons I didn’t write on DesertBeacon’s post is that I’m still working on understanding it.
part imaginary @root_e 22/10/2011 22:52:10 WIB
@Karoli there are reasons to critique Dodd-Frank, but "the left" keeps claiming it does nothing - which is false.
Karoli @Karoli 22/10/2011 22:52:15 WIB
@rootless_e but it pisses me off that bofa was able to shift their risk somewhere else and declare profits.
part imaginary @root_e 22/10/2011 22:53:56 WIB
@Karoli in some ways, they are responding to stupid ratings agencies and the laws that make ratings agencies semi-official
part imaginary @root_e 22/10/2011 22:54:53 WIB
@Karoli They supposedly moved things because of customers who believe the CDS to be valuable and dont want to be forced to cash out.
Karoli @Karoli 22/10/2011 22:56:48 WIB
@rootless_e frustrating that these transactions are so’s difficult for wonks to get it, much less ordinary folk.
part imaginary @root_e 22/10/2011 22:59:55 WIB
@Karoli agree, but that's why alarmist "I told you dodd-frank was worthless" crap citing people like Black makes me so annoyed
part imaginary @root_e 22/10/2011 23:04:40 WIB
@Karoli But minimal decency would have her put a correction on it about section 210(c) of Dodd Frank
part imaginary @root_e 22/10/2011 23:05:08 WIB
@Karoli and if you read the comments, you see shes working that "democrats=republicans" vein hard.
Karoli @Karoli 22/10/2011 23:10:17 WIB
@rootless_e what about the moral hazard? the idea that BofA climbs out of their bad choices without penalty?
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