One solution....Last week, I wrote a piece called When The ATM Run Dry about Cyprus and what is going on there.
But, it's not just a Euro Problem. Yes the Cyprus story is linked to the offshore "Treasure Island" banking industry phenomena and specifically, the economic panic in Russia that has forced the very rich to stash their money in off shore accounts.
But way beyond this, it is a huge story, and it takes very little to tell it. This is a story that affects you personally and the regulations and lack of regulations that control the money in the bank you think you have it securely stashed in. These are the basics on deposit confiscation and how we got there:
■ You know that the EU-forced solution to the failure of banks in Cyprus is to require the Cypriot government to confiscate (“tax”) deposits. That news is everywhere you look; it’s not in dispute or doubt. The latest has depositor losses at 60% due to the bailout-related “one-time” tax.
■ “Confiscating deposits” is exactly the opposite of “insuring deposits,” which is what is required in the EU, and also offered by the FDIC (as the ads say, “your deposits are insured up to $250,000″).
■ The next monster taxpayer-financed bank bailout could spark a revolution. Find me anyone who isn’t a friend of Money who doesn’t hate the Bush-Obama bailout. Dem, Republican, Libertarian, frog-on-a-rock — no one liked the bailout.
■ This takes a taxpayer-financed bailout off the table as the next way to make bankers whole when the stumble.
■ But bankers are going to stumble soon, and big. The derivatives market is huge, and they’re aggressively reversing the tepid Dodd-Frank derivatives regulations as we speak. Of course, friends-of-big-banks in Congress are helping.
■ So the next big bailout (which is coming) will have to come from somewhere else.
Guess where that “somewhere else” is? Deposits.
Nations have already started to institute rules that enable deposit confiscation
There’s an international move by national governments to write regulations that permit deposit confiscation in the case of bank failure. This is exactly the Cyprus model, and if the news stories are correct, confiscating deposits was being considered or enabled prior to Cyprus bank-failures.
Just check out what's happening in New Zealand!
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman. “The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.
Here’s what the New Zealand government says about “Open Bank Resolution” :
What is an OBR?
The Open Bank Resolution policy is a tool for responding to a bank failure. It allows the bank to be open for full-scale or limited business on the next business day after being placed under statutory management (as a result of, for example, an insolvency event). This means that customers will be able to gain full or partial access to their accounts and other bank services, whilst an appropriate long-term solution to the bank’s failure is identified. …
Why should depositors bail-out banks?
The OBR policy is designed to ensure that first losses are borne by the bank’s existing shareholders. In addition, a portion of depositors’ and other unsecured creditors’ funds will be frozen to bear any remaining losses. To the extent that these funds are not required to cover losses as more detailed assessment of the position of the bank is completed, these funds will be released to depositors. At a high level, this outcome replicates the outcome that would apply in the event that a failed bank was liquidated. The primary advantage of the OBR scheme, however, is that depositors would have access to a large proportion of their balances throughout the process. This contrasts with what would happen under a normal liquidation, where depositors might not have access to any of their funds for a significant period.
Why aren’t deposits guaranteed?
During the recent global financial crisis the government took the decision to put in place a temporary guarantee on retail deposits. On 11 March 2011 the Minister of Finance announced that further guarantees would not be provided following the expiry of the existing scheme. Furthermore, the Minister ruled out the possibility of introducing a compulsory deposit insurance scheme.
Read the rest if you like. That’s a government of New Zealand publication.
Deposit confiscation is being planned in the U.S. and the U.K.
It Can Happen Here: The Confiscation Scheme Planned for US and UK Depositors
Posted on March 28, 2013 by Ellen Brown
Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash.Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.” The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.
The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.” It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently [the writers anticipate] that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite …
No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. …
December 10, 2012 was pre-Cyprus. Deposit-confiscation wasn’t something cooked up on the fly. It’s been in the works for a while, by all the international Bigs. Note that the source of the negotiations is “the G20 Financial Stability Board in Basel, Switzerland.” This is indeed international.
This proves three things, I think:
Major governments exist, in part, to make sure no banker takes a loss anywhere in the world, regardless of risky behavior on the part of the banks. The world and its governments serve the bankers.
The next banking crisis is anticipated to dwarf the last one, and the Bigs have been making plans to bail it out with depositor funds, not taxpayer funds. Cyprus is just the first implementation.
Loss of deposit insurance is coming to the U.S.
Are You Paying Attention, Kids?Remember,The Rich vs. the Rest. They re ally have convinced themselves that “All your money are belong to them“ indeed. The outcome and again, I quote the master, The Grand Master Flash and The Message has bloodshed written all over it. Don't Push Us Cause We're Close To The Edge!
Bottom Line? What can you do? Learn about the place you trust to keep and invest your money. There are banks and credit unions which do not play this game. They are owned by the investors. It's your money and your choice and you are the one who is ultimately responsible! Every dollar taken out of the banking system and responsibly saved reduces the power of the big banks! I have been using a Union Bank for the last 25 years. It's really a credit union, yet I get better hands on money management than you could ever expect from a big commercial bank...Plus, even here in Europe, there is a system of free ATMs supported by my bank. Even when I use non supported ATMs, the fees are nominal compared to what you would pay if you had a CitiBank or Bank of America type of account.