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This is another naked attempt to grab federal insurance - aka a bailout - for their liabilities. Some creative accounting will move the debt from one place to another.

I think that's right. The key is this line from the FT story I quote in my parallel comment:

During the transition period, the Fed will make loans to both entities and to the broker-dealer subsidiary of Merrill Lynch against collateral acceptable for posting either by a bank or a securities firm.
The Fed expands the kinds of collateral MS, GS and Merrill Lynch can post - but in the case of Merrill Lynch, they're becoming part of Bank of America, so that's okay...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Sep 22nd, 2008 at 07:17:57 AM EST
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Yeah, Paulson will happily take their most toxic paper as collateral.  Talk about foxes guarding chickens.  Reagan would be proud.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 22nd, 2008 at 10:13:13 AM EST
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