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The worst case scenario?
My take on the B of A buyout is that Hank is piling up all the **** into one huge **** on B of A's books so that when they go under it is clearly too big to fail and can be handled in one fell swoop.
That's from a comment at calculatedrisk.blogspot.com. That view is an outlier, but it's always worth knowing the worst case scenario. At least it explains why B of A is interested in such a hasty deal with a losing business partner. Here is Paul Krugman's column. Here is Felix Salmon on the unlucky Damien Hirst. Arnold Kling outlines the best case scenario, which is right now a better forecast than the worst case scenario. On another front, maybe Lehman bonuses will be clawed back.
Posted by Tyler Cowen on September 15, 2008 at 08:09 AM in Current Affairs | Permalink
Comments
This makes it sound like the investment banks are playing a game of Hearts; and B of A is trying to shoot the moon.
Posted by: PK at Sep 15, 2008 9:24:49 AM
They've done stuff like this before. Part of B of A's growth out of being NCNB was due to buying up failing S&Ls.
Posted by: Some Random Economist at Sep 15, 2008 9:42:34 AM
So keeping some of my money in B of A isn't a bad idea yet?
Posted by: Brian at Sep 15, 2008 10:22:53 AM
not a chance this was a bad deal for BofA. merrill was shorting well before goldman last summer, and as the internationals reveal their own write-downs and losses in the spring, merrill's and goldman's books are gonna look pretty effing sweet. BofA will be laughing all the way to 2012.
Posted by: tp at Sep 15, 2008 1:10:43 PM
Don't forget though that B of A also took on Countrywide earlier in the year, so this isn't the only losing business parter it has purchased. One suspects that its actions are being informed by much feedback from Paulson, et al. As of right now, its stock price is down over 19 percent for the day.
Posted by: chris at Sep 15, 2008 3:08:09 PM
The worst case scenario sounds disturbingly like what I saw during the eighties farm depression. One of my father in law's feed customers convinced his bank he owed too much for them to foreclose. Economics of scale works in mysterious ways.
Posted by: James at Sep 15, 2008 5:13:30 PM
The worst case scenario sounds disturbingly like what I saw during the eighties farm depression. One of my father in law's feed customers convinced his bank he owed too much for them to foreclose. Economics of scale works in mysterious ways.
Posted by: James at Sep 15, 2008 5:14:07 PM
BofA will either prove to be brilliant and crash and burn in a huge way.
Stay tuned.
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