Bac having liquidity issues, keep an eye out.

Discussion in 'Economics' started by KINGOFSHORTS, Aug 8, 2011.

  1. Word is they have issues that will impact capital requirements and will need to raise capital soon. By next Thursday. Swaps are at leh levels and you know how that ended.

    The question is, if an event occurs will they get bailed out again? Or will the be allowed to fail.

    I suspect the public will no longer stomach bailouts for bankers after they saw what they did last time.
  2. m22au


    Possible but very unlikely the govt would let BAC fail. At the very least, they would buy 79.9% of BAC at $0.01 per share, in order to punish shareholders, which would help to take care of the political risk associated with another bank bailout.

    What's your source for "word is they have issues" by "next Thursday" ?


    $BAC ugly in late CDS 1Y 335/385 vs 5Y 285/305 - inversion is upon us chaps. Res of US fins widened but none inverted. Cparty hedging galore
  3. If they punish shareholders to save bondholders, there will be a lot of negative repercussions.
  4. m22au


    What kind of "negative repercussions" ?
  5. Back in the 80's the govt ran the Resolution Trust Corporation (RTC) which effective took the bank, wiped the bad assets off, refunded it, installed new people, common stock was wiped, bond and preferred stockholders made whole, and the bank was released back into the casino.

    Common shares are shit or mere poker chips.
  6. Yes, they are.

    The problem is that for the retail to buy into them, the illusion must be maintained that they have value. Without retail constantly bringing new fuel to the fire, the game fundamentally changes.
  7. They squicked both shareholder and bondholders with GM. Guess what? They got more suckers to buy back in again.