Bank of America - Merrill Would Violate 10% Deposit
Cap, Laws Snubbed by Subprime
Byline: Matthew R. Lee of Inner
City Press: News Analysis
September 12 -- Amid some gushing
about Bank of America stepping in to scoop up subprime-damaged Merrill
for $50 billion, an issue that has scarcely been raised is the law. In
Congress said that no one bank should control over 10% of insured
the United States. Bank of America has been at and over that deposit
years now. Merrill
Lynch Bank USA, based in Utah, has $57 billion in deposits. But in the
subprime meltdown Bank of America's regulators, most prominently the
Reserve Board, allow it to skirt the law, by defining all of the
buys as, well, non-deposits.
When B of
A bought the discredited subprime mortgage lender Countrywide Home
Fed decided that since Countrywide's deposits were technically in a
bank rather than a commercial bank -- a
distinction without a difference anymore, given that savings banks are
allowed to make small business loans as well -- it could approve the
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investment bank, Merrill Lynch had been unable to own a "regular"
bank. So it collected $57 billion in deposits through a so-called
Loan Company in Utah. These are deposits insured by the FDIC; they
toward any common sense reading of the 10% deposit cap.
issues has barely been mentioned. If the
past is any guide, the Fed has probably already given wink and nod
Bank of America. While the Fed has some powers to override laws it if
an emergency, it has not made any such declaration in this case. It's
engaging in more and more routine law-bending.
Merrill Lynch: the rain has only begun to fall
Lynch itself got directly involved in subprime, buying First Franklin
National City and holding subprime mortgage backed securities through
Lynch Bank USA and yet another bank, Merrill Lynch Bank & Trust.
argument to emerge that the deposits in both entities should be counted
the 10% deposit cap, and that Merrill's as well as Bank of America's
the subprime meltdown should be considered and acted on.
In other financial
meltdown news Lehman Brothers,
owner of such subprime rogues as Aurora and Delaware Savings Bank, is
bankruptcy; AIG, which bought American General and its subprime
asking the Federal Reserve for $40 billion in loans. For year, Fair
Watch raised to AIG's regulator, the Office of Thrift Supervision,
concerning AIG's subprime lending. But AIG pushed through, hiring
as its lawyers to argue that various laws didn't apply to it. Now the
institution, Washington Mutual, is said to be teetering. The chickens
coming home to roost, but will either the executives or the regulators
Watch this site, and this (UN) debate.
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