Feds Seek To Counter Imminent Bank Of America Collapse With Demand For Contigency Plans

The Feds demand Bank of America provide contingency plans to prevent financial collapse following a massive stock sell off and slew ominous financial revelations.

As Tyler Durden at Zero Hedge revealed, whose post along with information on Naked Capitalism  was ran on Business Insider sent Wall Street into a frenzy, Bank of America is in dire financial straits.

Bank Of America Scrambles To Defend Itself From Henry Blodget’s Allegations It Is Massively Undercapitalized

Submitted by Tyler Durden on 08/23/2011 12:35 -0400
Early this morning, Henry Blodget penned a post titled “Here’s Why Bank Of America’s Stock Is Collapsing Again” in which he used Zero Hedge data among other, to determine that the capital shortfall for the bank is between $100 and $200 billion. It took BAC exactly 6 hours to retort. Below is the full statement.

BANK OF AMERICA STATEMENT REGARDING HENRY BLODGET
2011-08-23 16:29:04.675 GMT
(The following is a reformatted version of a statement from Larry DiRita, a Bank of America spokesman. The statement was confirmed by the sender.)
Mr. Blodgett is making “exaggerated and unwarranted claims” which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003.  The sovereign exposure is off by a factor of 10.  The commercial real estate figures are off by a factor of four.  The mortgage analysis was provided by a hedge fund that has acknowledged it will benefit if our stock price declines.  The recommendations on goodwill accounting would be prohibited by generally acceptable accounting practices.  Traditional bank valuation relies upon tangible book value per share, which excludes by definition 100 percent of goodwill and other intangibles.  As of June 30, our tangible book value per share was $12.65.

Oh ok, Bank of America, that explains it all. As for the mortgage analysis being provided by a hedge fund “that has acknowledged it will benefit if our stock price declines”, co-authored by Zero Hedge, does that make it wrong? Last time we checked Muddy Waters made money on Sino Forest…
Source: Zero Hedge

In fact, they are severely under-capitalized making the company highly vulnerable to collapse.
Despite, heckling by the main stream media that the information was just posted by anonymous online bloggers, Mr, Durden certainly has the ear of Wall Street bankers and Hedge Fund managers.
Here’s on example of the corporate media reaction to Zero Hedge’s reports on Bank of America, attacking the messenger and ignoring the message in typical corporate news fashion.

And In The Category For Biggest Conspiracy Theory We Have….

Submitted by Tyler Durden
08/23/2011 21:27 -0400

Two and a half years after consistently and methodically exposing one conspiracy after another (and by the way, once it is proven to be a fact, it is no longer a conspiracy), we were stunned to find that the biggest conspiracy theory is none other than… Zero Hedge. “Zero Hedge, for example, is one that lots of hedge funds look at, lots of money managers look at, and the guy that runs it has their ear. Now I’m not saying that he is not doing his own proprietary work, but, people like to plant stories in there. [cue ominous silence].” TA DUN DUN.
Gee – one does learn something new every day.
And now, back to planting malicious rumors and vile, incorrect stories of ponzi schemes, broken markets, deranged vacuum tubes, plundered tungsten bars, BLS data manipulation, collapsing Nielsen ratings, hyperinflationary obsessive-compulsive printing habits, global central planner intervention and what not.
Also, to anyone who still doesn’t get it, please send your dodecatuple secret “plant” stories to plant@zerohedge[.]com along with your payment made in physical gold Zimbabwean dollars, to be delivered to our paper street headquarters. We certainly would prefer it if the drop man is Bank of America’s James Mahoney.
Source: Zero Hedge

And there is a reason he has the ear of Wall Street. The media has been exposed time and again printing outright lies and running propaganda pieces in their role as a stenographer and presstitute for big corporations and corrupt government officials.
Tyler has reported spot on news and analysis breaking and endless series of high impact financial news stories, such as the under-capitalization story above. Here is another interesting story – The  $2 million bet that Bank of America will be a $4 stock by November.
It looks like November is coming a lot faster than anticipated as Bank of America’s stock price continues to reflect the series of revelations made on Zero Hedge.
Now even the Feds are worried about fending off what appears to be an evermore imminent collapse of the bank.
Specifically, the Feds have demanded the company provide contingency plans for the almost certain case of continued failure.
The Daily Bail reports:

Federal Reserve Asks Bank Of America For Contingency Plans In Case Of Continued Failure

WSJ
Excerpt
U.S. regulators have pushed Bank of America Corp. to show what measures it could take if conditions worsen for the Charlotte, N.C., lender, according to people familiar with the situation.
Executives of the bank recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit, these people said. Bank of America purchased Merrill Lynch in 2009, and it has become the bank’s most profitable division.
Chief Executive Brian Moynihan isn’t expected to pull the trigger soon, if ever, on the creation of a so-called Merrill Lynch tracking stock. Such a move would raise money from investors but could be viewed as counter to Mr. Moynihan’s strategy of knitting together the disparate parts of the franchise into a cohesive whole. Its inclusion on the list as a theoretical option shows the bank is considering all possibilities as it wrestles with an array of problems weighing down its shares….
The Fed’s call for more documentation about what the bank might do in more-extreme circumstances was a response to uncertainty about a U.S. economic recovery and a downward swing in Bank of America’s share price earlier this year, one of these people said. It was a one-time request, although the Fed has done the same with other firms in the past.
Bank of America did the analysis at the Fed’s request in late July and early August and then provided the Fed with its menu of options, said people familiar with the situation. Some items, such as the tracking stock, were more theoretical than others.
Mr. Moynihan isn’t giving the tracking stock serious consideration at this point, said a person familiar with the situation, but he included it on the list to show the company has multiple levers to pull.
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More on the Merrill Lynch tracking stock from the WSJ…
Excerpt
In a list sent to the Federal Reserve of potential measures the bank could take should its situation worsen, BofA included the idea of a tracking stock for Merrill Lynch, according to a Wall Street Journal article. The trouble is such a move wouldn’t necessarily signal strength. If anything, investors might interpret it as a sign of desperation.
For starters, tracking stocks, which typically don’t confer ownership or voting rights on holders, have a fairly dismal history. They conjure images of dot.com days, when the instruments came into vogue.
Then there is the idea that a tracking stock for Merrill, which BofA purchased in early 2009, would really make investors ascribe it more value than BofA overall is currently getting credit for.
That is a stretch. If anything, a tracking stock would call into question whether the business is being fully integrated into BofA. It also could stoke speculation of a breakup. Investors don’t foresee that, and the prospect of it would cause worry.
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Here’s the correct solution to the Bank of America death spiral:

Chris Whalen Recommends Chapter 11 Bankruptcy For Bank Of America: Default And Liquidation Under Dodd-Frank

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See Also, from the Daily Bail:

BREAKING NYT REPORT – U.S. Government Is Set To Sue A Dozen Big Banks Over Fraudulent Mortgages – Including BofA, JP Morgan, Goldman Sachs & Citigroup

TARP On Steroids – Sherman Vs. Geithner

CNBC further reports:

Bank of America Under Fed Scrutiny

Bank regulators from the Federal Reserve have been pushing Bank of America to put in place a plan for what to do if conditions worsen, according to The Wall Street Journal.
[...] Bank of America’s stock price [BAC  7.355    -0.555  (-7.02%)   ] has been signaling severe distress for several months. Even the temporary boost from Warren Buffett’s $5 billion investment seems to have evaporated.
[...] bank regulators are supposed to take a proactive role in preventing a disorderly collapse of giant financial institutions. But there has been a lot of concern that, despite the rules, regulators might hesitate to pressure such a large bank to develop credible contingency plans.
[...]
This does raise further credibility concerns for the senior management of Bank of America. The bank has been loudly insisting that everything is just fine, that it’s capital and liquidity positions are healthy, and that it isn’t under any regulatory gun.
Today’s news tells a different story. Regulators are concerned.
Were Bank of America’s executives really surprised by this? Or have they been misleading the public about their contact with regulators?
Source: CNBC