1. Bailout Amounts and Placement on the FSB List of Too-Big-To-Fail Banks
Bank of America received $45 billion in bailout funds1 in the 2008-09 financial crisis.
Bank of America is listed by the Financial Stability Board as a systemically important financial institution.2 The Financial Stability Board is an international body that monitors3 the global financial system and is made up of members from the G20 nations.4
In November 2012, the Financial Stability Board listed Bank of America as one of 28 banks whose failure could cause serious systemic financial/economic problems.5
Bank of America's placement on the list is in the third tier used for 2012, which indicates that it is among the 14 most critical financial institutions in the global economy. Banks in this category are required by the FSB to have a level of capitalization that is quite low, at 1.5%.
FDIC Vice Chairman Thomas Hoenig, testifying before the House Financial Services Committee on June 26, 2013, said the biggest Wall Street banks are “woefully undercapitaalized,” while calling the industry underpinnings a “very vulnerable financial system.”
2. Derivatives Holdings
Bank of America holds an enormous $44.543 trillion (notional value) in derivatives, and appears in position 3 of 25 top banks holding derivatives.6 During Chapter 11 bankruptcy in the U.S., derivatives counterparties receive "super-priority" status above all other creditors, including depositors. This means that derivatives counterparties will get allof the bank's assets before any other creditors, including depositors, are paid.7
Due to the contagion effect8 of our fractional reserve banking system and Bank of America's investments in derivatives, deposits held with Bank of America may be vulnerable. Bank of America's failure could have a significant impact on our economy in Washington, DC. As noted below Bank of America holds a significant share of deposits for the government of DC.
(follow link for current DC market share for Bank of America)
4. DC Government Deposits/Investments
(follow link for current DC government deposits with Bank of America)
5. Criminal Activity List
As of 2012, one report showed Bank of America is facing a dozen criminal charges and has paid various fines. Listed below are some of the penalties and lawsuits.10
On October 24, 2012, a federal prosecutor in Manhattan filed a lawsuit alleging that Bank of America fraudulently cost American taxpayers more than $1 billion when it sold toxic mortgages to Fannie Mae and Freddie Mac 11 12
As of July 11,2012, Bank of America is one of sixteen banks being investigated for rate rigging in the LIBOR scandal13
In 2010, Bank of America was accused by the U.S. government of defrauding schools, hospitals, and dozens of state and local government organizations via misconduct and illegal activities involving the investment of proceeds from municipal bond sales. As a result, the bank agreed to pay $137.7million 14 15
In late 2010, the Attorney General of Arizona said Bank of America "repeatedly has deceived" mortgagors, who wanted to modify their mortgages. Bank of America agreed to modified mortgages on the condition that the homeowners refrain from criticizing the bank.16 17
September 9, 2010, former Bank of America official Douglas Campbell pleaded guilty to antitrust, conspiracy and wire fraud charges. As of 20 July 2012, other bankers and brokers are under indictment or investigation 18 19
July 28, 2009, Bank of America reached a settlement with Parmalat SpA after allegedly profiting from its knowledge of Parmalat's financial difficulties.20
1 Bank of America, http://newsroom.bankofamerica.com/press-release/corporate-and-financial-news/bank-america-repay-entire-45-billion-tarp-us-taxpayers
2Financial Stability Board, http://www.financialstabilityboard.org/publications/r_111104bb.pdf
3 Financial Stability Board, http://www.financialstabilityboard.org/about/mandate.htm
4 Financial Stability Board, http://www.financialstabilityboard.org/members/links.htm
5 Financial Stability Board, http://www.financialstabilityboard.org/publications/r_121031ac.pdf
6 Office of the Comptroller of the Currency, http://dcpublicbanking.org/wp/wp-content/uploads/2013/08/OCC-1Q13-Top-25-Derivatives-Holders.png
7 Princeton Law Review, Prof. Mark J. Roe, The Derivatives Market's Payment Priorities as Financial Crisis Accelerator: http://www.naic.org/documents/committees_e_receivership_110819_comments_mo_doi.pdf
8 Chris Martenson Peak Prosperity, http://www.peakprosperity.com/video/223/playlist/153/chapter-7-money-creation
10 Unoccupy Albuquerque, http://unoccupyabq.org/wp-content/uploads/2012/01/BofA-stats.pdf
11 Department of Justice, http://www.justice.gov/usao/nys/pressreleases/October12/BankofAmericanSuit.php
12 USA Today, http://www.usatoday.com/story/money/business/2012/10/24/bank-of-america-mortgage-fraud/1654441/
14 Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2010/12/07/AR2010120703314.html
15 Department of Justice, http://www.justice.gov/opa/pr/2010/December/10-at-1400.html
16 Attorney General of Arizona, http://www.azag.gov/press_releases/dec/2010/Press%20Release%20-%20Bank%20of%20America.html
17 Think Progress, http://thinkprogress.org/economy/2012/01/26/412273/bank-of-america-buys-silence-fraud-investigation/?mobile=nc
18 Department of Justice, http://www.justice.gov/opa/pr/2010/September/10-at-1008.html
