Friday, November 11, 2011

BofA Says Regulators May Limit Transfer of Merrill Derivatives

This is by far the biggest news story of the day.
If Bank of America is not successful in transferring $50 billion in worthless derivatives from its Merrill investment unit to the American sheople, expect BOA to be deep-sixed within the next 3-6 months.

Nov. 11 (Bloomberg) -- Bank of America Corp. may be prevented by regulators from shifting derivatives contracts into the books of a deposit-taking unit, potentially forcing the lender to hand over more collateral to counterparties.

The lender has designated the retail-deposit unit, Bank of America NA, as the new counterparty on some Merrill Lynch contracts after the company's credit ratings were cut in September, it said last week in a filing. The Federal Reserve and Federal Deposit Insurance Corp. have disagreed over the moves, and they are now discussing whether to allow future transfers, according to people with knowledge of the matter.
Bank of America's holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of the contracts at the end of June, according to data compiled by the Comptroller of the Currency. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades. The company is the second-largest U.S. lender by assets.