Burt Likko notices that JP Morgan may be on the verge of buying up Bank of America – with lots of government help.
Too big to fail gets even more entrenched.
I think we should have broken up the big banks as a condition of bailout money. Instead we’re helping them get even bigger and more systemically risky.
Erik Kain
Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.
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If they’re already too big to fail, the only defensible way to go up is to nationalize ’em.
Otherwise, all rationality points to making them smaller.
But hey, we managed to screw the pony again. American politics do seem to lead to the worst possible implementations of the bottom-up/top-down hybrid.Report
Just to note, someone objected to the rumor.
http://www.huffingtonpost.com/2011/08/24/bank-of-america-jpmorgan-merger-rumors_n_935484.html
There was recently a column on Seeking Alpha on Bank of America’s most recent balance sheet. The burden of the column was that the bank needed to write down its residential loan portfolios further but that the other components of its business were earning.Report
Well, this is just a rumor. BofA denied it pretty quickly. I’m guilty of spreading rumors, but the object lesson here may be that we were all quite ready to believe that the government was willing to subsidize a deal like this to the tune of $100B.Report
We less one.Report
Well, the government does owe J P Morgan one bailout.Report
Never believe anything until it has been officially denied.Report
I thought the point was to deleverage and decentralize risk…
These institutions should have been nationalized and then spun off a while ago. This government backed corporatism is idiotic.Report
I believe government-backed corporatism is the definition of fascism.Report
E.D. would you or Jason the Magnificent do a blog on the Dept. of Injustice’s inquiries into Standard and Poor? This comes, I heard, just a few weeks after the down grade and looks fascist to me.Report
The inquiry started before the downgrade. Indeed, it’s far more possible that the downgrade was a shot by S&P against the government, especially since the other two major rating agencies didn’t downgrade the debt.Report
I’m a little surprised this didn’t happen sooner. JP Morgan was one of the only big banks that didn’t get overly involved in the sub-prime nonsense or other financial creativities. They’ve already done a bit of this.Report
What this guy said.Report
Wow.Report
This could be a deal like WAMU where JPM buys only the Bank not the Holding company, so that Merrill Lynch and the remnants of Countywide are left to twist slowly in the wind, but Timmy would object most strenously to this, as he objected to WAMU. Note that in the WAMU case it was the bank only that JP Morgan bought the holding company was left to go belly up. This of course did the deed and cost those fools who bought holding company bonds money. (IMHO if you make a loan (buy a bond) from a holding company in a desire to get a better rate you get what you deserve). But Sheila is gone so it won’t happen. The common shareholders of BofA have been 80 to 90% wiped out already might as well get the rest of the deed done. Unfortuantly however the deferred income and supplemental pension plans are at the wrong point in the capital structure, they should be even with the common so the big bosses get theirs. Note that the big bosses would still get 195k/year from the Erisa pension plan so they would not starve but might have to sell their mansions.Report