"Bank of America Corp. (BAC), hit by a credit
downgrade last month, has moved derivatives from
its Merrill Lynch unit to a subsidiary flush with
insured deposits, according to people with direct
knowledge of the situation.
Do I have this right? BAC wants to put (or the Fed wants them to put)
dicey financal instruments under FDIC in bulk? Maybe I'll buy a lot
of lottery tickets and deposit them using the same trick. If they
fail to win, FDIC will compensate me?
This finance stuff exceeds my feeble mental capacity (or at least my
similarly feeble knowledge base.) The Canadian version of FDIC has a
fairly stringent limit on the amount that can be covered in an account,
$60K maybe? (I forget the exact figure.) Doesn't FDIC have something
similar?
Or is it that the BAC wants to make these dicey instruments their
collateral assets, so that if they -- the bank -- go blooey, they --
the instruments -- will vaporize and compensation to depositors will
be on the FDIC's instead of coming out of the banks assets.
No, I don't think I have it right yet. Dang.
I'm good (if under-equipped intellectually) with mathematical models
and abstractions and I'm good with tangible, observable
stuff. Finance at all levels appears to me to be a convoluted game
that depends on magical thinking, deviousness, manipulation, legal and
semantic jiggery-pokery and other sundry conjurations too numerous to
catalogue.
[This [1] has to be in a Down Maine rural accent, which is too tedious to
represent typographically...]
When I wuz fahmin dowun Maine, my hiahed hand up and got married.
As there was no one available in the neighbahood to take his place,
I had to send up to Kittery to get a man.
My new hand come down on the train and we got him settled in the
same day. Next morning it was foggy, a real down Maine fog the
likes of which they never see up to Kittery. So we done the
milking, fed the critters, had breakfast and by 8:00 we were ready
to go to work.
So I says to him, the barn roof's ready for shingles. You go up
and put on shingles. I have to overhaul the harness and tighten up
a shoe on the mare. So he goes up.
Come lunchtime, we're sitting down to cornbread and sausage and
cider and I says, how many courses of shingles did you put on and
he says, You must have the damndest big barn in all creation for
I've done just the one and I ain't done with it yet. Well, I says,
you must be slacking off. You oughtn to have at least two courses,
maybe three, on by now.
So after lunch, I goes up to have a look and dang if he hadn't
shingled a hundred and fifty feet out onto the fog.
I'm guessing that the financial guys have never seen a Down Maine (or
any other) Reality and have shingled several terabucks out onto the
fog.
FWIW,
- Mike
[1] With a tip of the hat to Botkin's Treasury of New England
Folklore.
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