Bank of America Gaming Government Loan GuaranteesSubmitted by bmoreland on 02/26/2010 11:22 -0500
I have long suspected that it was only a matter of time before banks began to adjust their Collection efforts to reflect Government Guarantees on their loan portfolios.
Simply put, imagine you are a bank with $100 billion in loans. Of this, $20 Billion is guaranteed by the government, $80 billion is your own money. If you managed the collection organization responsible for servicing this debt wouldn't you be just a wee bit tempted to make sure that your $80 billion was getting the priority?
The table below details the past 12 quarters of Total Loans for Bank of America along with the portion that is Noncurrent:
The Noncurrent percentage has jumped from 5.30% in Q3 to 6.75% in Q4. Quarter on Quarter there is another $12.44 Billion in Noncurrent loans.
The next table details the same 12 quarters and reviews what portion of the Noncurrent loans are guaranteed by the Government (er, you and me the taxpayer):
Bank of America has had a massive jump in the Noncurrent loans that are Governement Guaranteed. The Quarter on Quarter jump is... wait for it... $11.40 Billion.
So, magically, the incremental $12.44 Billion that has become Noncurrent Quarter on Quarter at Bank of America has a guarantee on $11.40 Billion. Nearly 92% of the jump in their Noncurrent loans are covered by us, the taxpayer.
This is no consipiracy theory discussion - these are cold hard facts supporting what any reasonable actor would do in the situtation. If the government is going to cover my losses on a portion of my loan portfolio I can damn well guarantee you I'd be moving my best collectors to the portfolio I'm responsible for. The government can have my new hires, my undesirables, my slow workers, etc...
I highly doubt that we'll ever hear about this, but this is yet another massive shift from the taxpayer to the banks.