Bank of America Earnings

I just finished reading the press release from Bank of America on its earnings, and found this paragraph to be the most interesting:

"The company incurred about $400 million in losses to support certain cash funds and also had subsequent writedowns of about $400 million related to securities originally purchased from the funds at fair value."

It cost them $800 million to bail out one of its money market funds, to keep it from "breaking the buck."

No More Bloody Shoes

Everyone is waiting for the next "shoe to drop" in the financial markets. No one knows when or what it will be but the market spends an inordinate amount of time thinking and speculating about it. Here is another scenario:

Citigroup, Inc. releases a press release at 2:00 AM on Sunday Morning on Thanksgiving Weekend. It is noteworthy for its simplicity and brevity. It reads:

"Citigroup, Inc., announced this morning that it will no longer provide credit support to the multiple Structured Investment Vehicles that have been carried off balance sheet. While Citigroup, Inc. previously supported these vehicles through various means in order to maintain market stability, the bank is under no legal obligation to do so, and has decided to use our capital for other purposes."

The silence is deafening - for a moment - as the market takes a couple of seconds to digest and understand the implications of this. At the close on Monday, the first money market fund "breaks the buck" and trades at less than a dollar a share. Panic sweeps the staid world of the money markets, accelerated when the great mass of individual investors finally realize that a dollar in a money market fund does not equal a dollar of cash.