Dem Senators Raise Issue of Backdoor BofA Bailout

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Dem Senators Raise Issue of Backdoor BofA Bailout

FireDogLake – Ten Democratic Senators, led by Sherrod Brown (D-OH), have written to financial regulators expressing their opposition to the recent move of Bank of America derivative exposure from Merrill Lynch to their federally insured subsidiary. By putting the derivatives under the FDIC, this puts taxpayers on the hook for potentially massive losses (the notional value of the derivatives is over $53 trillion, though that wouldn’t be the exposure) if Bank of America goes under.

Brown was joined on the letter, sent to Fed Chair Ben Bernanke, the acting chairs of the FDIC and the Office of the Comptroller of the Currency, and Treasury Secretary Tim Geithner, by Carl Levin (D-MI), Jeff Merkley (D-OR), Mark Begich (D-AK), Richard Blumenthal (D-CT), Tom Harkin (D-IA), Robert P. Casey, Jr. (D-PA), Bill Nelson (D-FL), Sheldon Whitehouse (D-RI), and Maria Cantwell (D-WA). Levin and Merkley wrote the modified Volcker rule that appeared in the Dodd-Frank financial reform bill. The more wide-reaching reinstitution of Glass-Steagall, proposed by Cantwell, would have prevented this kind of co-mingling between investment and commercial banks. Brown and former Sen. Ted Kaufman (D-DE) had a bill that would have reduced the size of large financial institutions, as well as capping leverage.

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