Tuesday, October 20, 2009

The “Dis-Savings” Glut

This morning the price of oil rose over $79. Gold is trading at $1,051…about one-tenth the price of the Dow.

The Dow fell 67 points on Friday. Investors began to wonder if the news coming from the banks was as good as the first reports indicated.

For example, the Bank of America reported losing a billion dollars on its consumer accounts. It is all very well for JPMorgan and Goldman to make money. They’re investment banks. And they’re making money thanks to the US government’s generous bailouts. They pay almost nothing for borrowed funds…in dollars, of course. And then they take the money and bet against the dollar. So far, those bets are doing pretty well.

Meanwhile, the Bank of America is a real bank. With real mom and pop customers. And the poor moms and the poor pops are going bust. They can’t pay their bills. Or, at least so many of them can’t pay their bills that it cost BoA $1 billion in loans write-offs. (more)

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