Northern Country

How globalization changes capitalism, the economy and politics

Posts Tagged ‘bankruptcy

Merrill’s impact on Bank of America

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In September 2008 after bankruptcy of Lehman the financial industry as a whole nearly collapsed. Subsequent contraction of international trade was tangible proof for the serious threat Lehman posed to the stability of the system. Ben Bernanke putting the proverbial gun to Ken Lewis head while trying to rescue another Wall Street titan, Merrill Lynch,  broke the law but might as well have saved international commerce and the world from the brink of disaster.

A government report from the congressional oversight panel (COP) on troubled assets from financial institutions concludes that banks’ balance sheets are still clogged with possible future losses from hundreds of billions of impaired assets (also….). In the report’s data something else is being revealed too, with respect to Bank of America’s acquisition of former investment bank Merrill Lynch.

After the merger with Merril BofA’s most toxic level 3 assets jumped 127 percent to $126.9 billion in the first quarter of 2009. Loan quality in the form of 90+ day past due loans ballooned from $5 billion at the end of 2007 to $141.7 billion as of March 31, 2009. BofA’s credit derivative exposure to sub-investment grade assets experienced a significant uptick from little more than $500 billion to about $1.65 trillion over the last 15 months.

Under these conditions Lewis’s reluctance to close the deal is understandable, so is Bernanke’s assertiveness on this issue. The following diagrams reveal survival of the financial system and the well being of international commerce might have been at stake in those crucial days of late 2008. It seems that BofA will chew on this piece of financial crap from Merrill’s almost bankruptcy for years to come.

All the while executives at the firm and elsewhere are starting to rejoice again on better than feared earnings for the most recent quarter and reward themselves with another round of lavish bonuses. Wall Street star analyst Richard Bove in a note to investors cut short any hopes for a sustainable recovery in financials claiming bank earnings won’t improve in the third or even the fourth quarter.

COPreportAug09-pastdue COPreportAug09-creditderiv

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Written by Alfred

12. August 2009 at 12:19 pm

The end of an era

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Today General Motors an icon for the American middle class and pride of American manufacturing skills filed for Chapter 11 bankruptcy protection. At about noon on June 1st 2009 the President of the United States made it official and another resident from Flint, Michigan, the town where everything started about 100 years ago, wrote a column in the Huffington Post to bid a last farewell, Goodbye GM.

Michael Moore, filmmaker and writer is an outspoken critic of the Bush administration and the neoconservative right wing agenda of the Republican party. He is certainly not the only one outraged by a development that resulted in the largest bankruptcy filing in history. The filing reported US$82.29 billion in assets and US$172.81 billion in debt. The tens of thousands of workers who had already been laid off and many more will lose their jobs in the coming days and weeks are the ones closest to this tragedy, but they could not have a better steward than the filmmaker from Flint.

Moore is one of them. He understands the problems of the middle class in America better than anybody else and he has proven it with a track record of sociocritical writings and films that have covered everything from High School tragedies, the lies of the Bush administration and the failing health care system, to his first documentary, Roger and Me, where he delved into the faith of his hometown Flint, after GM closed its factories there. Reading his column in the Huff Post almost feels like a closure. With GM’s bankruptcy he has come full circle and the entire nation with him.

So here we are at the deathbed of General Motors. The company’s body not yet cold, and I find myself filled with — dare I say it — joy. It is not the joy of revenge against a corporation that ruined my hometown and brought misery, divorce, alcoholism, homelessness, physical and mental debilitation, and drug addiction to the people I grew up with. Nor do I, obviously, claim any joy in knowing that 21,000 more GM workers will be told that they, too, are without a job……Let’s be clear about this: The only way to save GM is to kill GM. Saving our precious industrial infrastructure, though, is another matter and must be a top priority. If we allow the shutting down and tearing down of our auto plants, we will sorely wish we still had them when we realize that those factories could have built the alternative energy systems we now desperately need. And when we realize that the best way to transport ourselves is on light rail and bullet trains and cleaner buses, how will we do this if we’ve allowed our industrial capacity and its skilled workforce to disappear?

He would not be Michael Moore if he would not have a plan, and a good one at that too. So he has a few ideas for the President and the people of America, who own sixty percent of GM at this moment. Among those are:

  • convert our auto factories to factories that build mass transit vehicles and alternative energy devices.
  • Announce that we will have bullet trains criss-crossing this country in the next five years.
  • Initiate a program to put light rail mass transit lines in all our large and medium-sized cities. Build those trains in the GM factories.
  • Transform some of the empty GM factories to facilities that build windmills, solar panels and other means of alternate forms of energy.
  • To help pay for this, impose a two-dollar tax on every gallon of gasoline.

Moore sees that as a start. He wants to prepare for the coming energy collapse and at the same time rebuild the middle class. Even with the collapse of GM and the current economic slump his suggestions seem too radical for the American populace. On the other hand, the same way how more and more start to hate their idle of the past, Ronald Reagan, they might one day worship at the altar of someone else. Maybe this time it will be a filmmaker from Flint, Michigan.

Written by Alfred

1. June 2009 at 9:47 pm