This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.
What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan. Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.
NOTE: The term backstopping means to cover… according to Investopedia - Back Stop Definition
Back Stop - Definition of Back Stop on Investopedia - The act of providing last- resort support or security in a securities offering for the unsubscribed portion of ...
This is on the heels of the Fed revealing in audit that the banks both foreign and at home were bailed out privately by Feds and Corporations to the tune of 16Trillion dollars. Google it, you’ll be glad you did.