Tuesday, October 4, 2011

Something's Up with the Banks

BAC, 5-year CDS spread

Default insurance for Bank of America debt continues to get more expensive. We'll know shortly whether MainePERS continued to hold BAC bonds and stock through the third quarter.

Meanwhile, BofA further endeared itself to its customers by announcing last week that it would charge debit-card users $5 a month just because. Ever since the announcement, the firm's online banking site has been overwhelmed by traffic. Those attempting to log on to do business are greeted with this:

[click to enlarge]

Could it be that the run on deposits has finally started?

CDS spreads for Morgan Stanley are even wider (by over 100 bps) because of that bank's perceived exposure to European banks, which in turn have heavy exposure to the shaky sovereign debt of countries like Greece. The whole system is stacked like dominoes. When they start falling....

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