Sold me out, for chump change (yes you did!!)
Told me that they, they had it all arranged
You handed me down, and thats a fact
Now you’re pumped, You gotta get ready
For the big payback!! (the big payback!!)
That’s where I am, the big payback
Leave it to Billy Clinton to spill the beans, telling Bloomberg that Bank of America’s curiously generous settlement with mortgage investors duped by Countrywide dreck — led by the New York Fed — may be a precursor to the bank forgiving billions in loan principal.
The pols in Washington obviously like that idea — it makes them heroes at zero direct cost to the Treasury. The banks just as obviously see that solution as worse than the disease. It would admit that outstanding loans are nothing more than mythical constructs subject to political and regulatory whim.
But consider the quid pro quo involved, especially if you are Brian Moynihan. In exchange for a limited and targeted writedown, you get political and regulatory forbearance, including implicit Fed and Treasury backstops above and beyond your TBTF peers. The legal and tax implications of writedown are tricky, but Moynihan’s lawyer-brain presumably is wired to do this sort of thing. In an era of little to no revenue growth from lending, perhaps not such a bad deal. Might even get another stock price pop, an obvious worry for BAC execs and investors.
Better still, the President would get to take credit for handing millions of voters big sacks of cash just in time for the DNC convention in Charlotte. Home of Bank of America.
