Alex’s Notes: And the massive derivative mess continues to unwind.

The US has pushed so much paper into the markets, and the Fed has used up pretty much all its credit, so the next shoe to drop will be the bond markets.

More bailouts = direct bond issuances by the Federal Reserve. Scary territory.

When that bubble pops, look out, because you aint seen nothin’ yet.

***

Bank of America Drops as Merrill May Need U.S. Aid By David Mildenberg

Jan. 15 (Bloomberg) — Bank of America Corp., the biggest U.S. bank by assets, plunged as much as 28 percent in New York trading on concern the company needs more government aid to absorb losses from the acquisition of Merrill Lynch & Co.

The lender slid $2.26 to $7.94 at 10:52 a.m. in New York Stock Exchange composite trading. Bank of America told regulators in December it might abandon the takeover because of Merrill’s worse-than-expected results, and

In recent years Bank of America (BAC) CEO Ken Lewis has taken a decent amount of heat from shareholders who have seen his acquisition spending spree as a bit reckless, at least in terms of the prices he has been willing to pay. Deals for the likes of FleetBoston and MBNA have made sense strategically, but the huge premiums offered did little to convince BAC investors that they were getting a good deal. That, in part, has contributed to the fact that BAC has been afforded a low multiple in the marketplace, relative to other large banking institutions, in recent years.