Tag Archives: cyprus

Growing Political Deception On Bank Deposits Theft

4 Jun

Truth-Lies

On All Fool’s Day 2013, this blog published the exposé — since cross-posted on globalresearch.ca — that G20 Governments All Agreed to Cyprus-Style Theft Of Bank Deposits In 2010.

It is telling to observe how politicians (and the media) worldwide are using the deceitful art of sophistry to obscure this truth.

As they all begin to pass the necessary legislation to enact what they have already agreed to — in secret, without providing clear and transparent advice to the public — they are seeking to subtly imply that these measures are needed as a result of what happened in Cyprus.

When the truth is, little Cyprus was just the first test case for implementing the Goldman Sachs-headed internationalist Financial Stability Board’s new bank “bail-in” regime, agreed to by all G20 Prime Ministers and Presidents nearly 3 years ago.

Ponder carefully the emphasised passage in the following Reuter’s news story:

EU draft bank rescue law would not shield big deposits

(Reuters) – A draft law that a group of European Union lawmakers voted for on Monday would shield small depositors from losing their savings in future bank rescues, but customers with more than 100,000 euros in savings when a bank failed could suffer losses.

A group of lawmakers in the European Parliament’s economics committee overwhelmingly voted that, from 2016, large depositors in the EU might suffer losses if a bank gets into serious trouble. The plan was similar to a deal in Cyprus, where wealthy depositors at two banks took hits to save the country from bankruptcy.

Under the EU proposal, a bank would dip into large deposits of over 100,000 euros once it had exhausted other avenues such as shareholders and bondholders. But deposits under 100,000 euros would be spared.

“The case in Cyprus showed how important it is to have clear procedures for making shareholders, bondholders and ultimately depositors foot the bill,” a press release from the committee said after the vote.

See what I mean? The Cyprus “bail-in” test case, deceitfully used as an example of why governments supposedly need to pass legislation for “similar” actions in their own countries … legislation that they already agreed to pass anyway, nearly 3 years ago.

EU finance ministers agreed last week that large, uninsured depositors should be subject to losses but some countries may still seek some flexibility on how they wind down their banks.

The “finance ministers” agreed, “last week”?

This is a deception.

As shown previously, the Prime Ministers and Presidents of the G20 nations all agreed to the policy framework laid down by the Financial Stability Board (FSB) at the Seoul G20 Summit, way back in 2010.

A framework that explicitly includes “bail-in” of banks, using the deposits (i.e, savings) of bank “creditors”:

“Carry out bail-in within resolution as a means to achieve or help achieve continuity of essential functions…”

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There is something else that is very important to note.

The FSB, politicians, bankers, and bureaucrats all want you to believe that these new procedures might only place at some risk the savings of so-called “large” or “big” depositors.

This is untrue.

The FSB-recommended “powers” for the G20 nations’ new bank “resolution authorities” exhibit Orwellian deception and moral relativism at their finest. Embedded within their recommended “Safeguards”, is a caveat allowing those “resolution authorities” to act with impunity when it comes to the theft of depositors’ money:

“Resolution powers should be exercised in a way that respects the hierarchy of claims while providing flexibility to depart from the general principle of equal (pari passu) treatment of creditors of the same class…”

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In other words, whether you have more than (say) 100,000 Euro/Dollars/Pounds deposited in a bank, or less, it is recommended (by Goldman Sachs’ FSB) that G20 governments legislate powers enabling their “resolution authorities” the “flexibility” to treat you any way they see fit.

“Equal treatment” is only a “general principle” to these people.

You may be wondering, if G20 governments all agreed to this way back in 2010, then why are we only now seeing nations from Canada to Europe beginning to draft and pass bank “bail-in” legislation, behind a smokescreen of lies and deceit?

As can be seen from the FSB press release of November 2011:

“Implementation of these measures will begin from 2012. Full implementation is targeted for 2019.”

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Some nations’ politicians are simply moving faster than others, in the coordinated drive towards the ultimate goal of stealing your savings, in order to “bail-in” so-called “systemically important” banks:

Earlier on Monday, Bank of England Deputy Governor Paul Tucker said the EU law on bank recovery and resolution would be a milestone towards a global system.

Federal Reserve Governor Confirms – Bank Depositors Will Be Cyprused

20 Apr

Recently your humble blogger pointed out the original source documents proving that G20 Governments ALL Agreed To Cyprus-Style Theft Of Bank Deposits … In 2010.

Today, we draw your attention to a speech from Governor Jeremy C Stein of the Federal Reserve Bank just 3 days ago, confirming that US bank depositors will be Cyprused:

I will focus my remarks today on the ongoing regulatory challenges associated with large, systemically important financial institutions, or SIFIs. In part, this focus amounts to asking a question that seems to be on everyone’s mind these days: Where do we stand with respect to fixing the problem of “too big to fail” (TBTF)? Are we making satisfactory progress, or it is time to think about further measures?

I should note at the outset that solving the TBTF problem has two distinct aspects. First, and most obviously, one goal is to get to the point where all market participants understand with certainty that if a large SIFI were to fail, the losses would fall on its shareholders and creditors, and taxpayers would have no exposure.

Errr … as we keep saying, creditors of banks (ie, the depositors) ARE taxpayers.

…if .. a SIFI does fail, the orderly liquidation authority (OLA) in Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act now offers a mechanism for recapitalizing and restructuring the institution by imposing losses on shareholders and creditors.

Mohamed El-Erian was right.

Cash out while you still can.

Infographic: Cyprus Bank Deposits Confiscation

5 Apr

With thanks to “Oto”, creator of the superb demonocracy.info, comes this infographic on Cyprus:

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Do check out the higher resolution version – with even more info – at demonocracy.info

G20 Governments All Agreed To Cyprus-Style Theft Of Bank Deposits … In 2010

1 Apr
FSB - G-SIFI, Nov 4, 2011 (click to enlarge)

FSB – G-SIFI, Nov 4, 2011 (click to enlarge)

November 11-12, 2010.

Armistice Day.

That is when all the major governments of the G20 first agreed to implement the new, Cyprus-style “bail-in” regime, at the direction of the internationalist Financial Stability Board under its new, GFC-enabled “broadened mandate”

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The pretext?

Financial stability, of course.

“Addressing the ‘too-big-to-fail’ problem”.

With a “new international standard”.

Specifically, “to enable authorities to resolve failing financial firms in an orderly manner without exposing the taxpayer to the risk of loss.”

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One cannot help but laugh at the Orwellian doublespeak slogans used by the architects of this new regime.

To address the problem of “systemically important” banks, “without exposing the taxpayer to the risk of loss,” our puppet politicians have agreed to confiscate … the savings of taxpayers.

Yes, today is All Fools’ Day. And no, you can’t make this $h!t up.

You may be thinking that this excerpt from an FSB press release does not prove that the G20 have specifically agreed to confiscation of bank deposits. And you would be correct.

As with all such schemes, it is not intended that the public will easily discover what has been planned. You have to wade carefully through all the verbose (and deliberately obtuse) technocrat-ese, and cross-reference the supporting documents (and their annexes), in order to discover just what our G20 attendee politicians – geniuses like “World’s Greatest Treasurer” Wayne Swan – have actually signed up to.

And to find the smoking gun.

One with the word B A I L – I N stamped clearly on its barrel.

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First, in the FSB press release of 4 Nov 2011 we are told that the G20 allegedly “asked the FSB to develop a policy framework to address the systemic and moral hazard risks associated with systemically important financial institutions (SIFIs).”

Next, in Seoul 2010, “G20 leaders endorsed this framework and the timelines and processes for its implementation.”

That framework is set out in the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions” (pdf).

In the preamble of that document, we learn that one of the objectives is to make it possible for “unsecured and uninsured creditors to absorb losses.”  Meaning, if your savings are not covered by some form of government guarantee or federal insurance (for all that is worth) – or if, as in Australia, the government bank deposits guarantee is limited to an amount significantly less than (ie, 1/10th) the total of actual bank deposits held by the public – then your bank account can be made to “absorb losses”. And as we will see shortly, this can be done entirely without your consent –

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In the sub-points of the preamble, we see that G20 governments are expected to “have in place a recovery and resolution plan (“RRP”) … containing all elements set out in Annex III.”

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Each jurisdiction is required to set up a “Resolution authority”, which is to be “responsible for exercising the resolution powers over firms…”

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The Resolution authority’s powers are most interesting. For example, we can all applaud the idea that such an authority could (not that they actually would) “claw-back” bankers’ bonuses –

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What is of serious concern though, is its power to “transfer or sell assets and liabilities, legal rights and obligations, including deposit liabilities and ownership in shares, to a solvent third party,”without consent

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This is confirmed in Key Attribute 3.3, where it is clearly stated that any transfer of a bank’s assets or liabilities (ie, deposits) by the authority “should not require the consent of any interested party or creditor to be valid”, and, that any such action will not be deemed a “default” of the bank’s legal obligations –

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Now if you are still sceptical that all this means the G20 have specifically agreed to a new regime that might include provisions for a Cyprus-style “bail-in” using depositors’ savings, then perhaps it is because you – like me – would be looking for this exact phrase in order to be fully convinced.

Yes, it is there. 

Lucky number (ix) in the “powers” (page 7-8) of the Resolution authority that each of the G20 governments agreed to establish, back in 2010 –

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Note that not only can the Resolution authority use a “bail-in” to support “continuity of essential functions” of a failing bank; it can also do so in order to finance the setting up of a new third party or “bridge” institution, into which the failed (“non-viable”) bank’s assets or liabilities (ie, your savings) can be transferred. Not so you can get your money back, but for the purpose of “capitalising” the new institution.

At that other elite lucky number (xi), we see another power; to shut banks, suspend payments to customers (except for payments to “central counterparties”, ie, to central banks, quelle surprise), and impose a “stay” on actions by creditors (eg, deposit holders) to “collect money”

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You may have noticed that the “bail-in” power at (ix) referenced Key Attribute 3.5. There, we see that the power to carry out a bail-in “should” (how comforting) be performed “in a manner that respects the hierarchy of claims in liquidation.” This no doubt will reassure the more gullible reader that there is nothing nefarious in this plan; that it is clearly intended that the traditional hierarchy of claims in a bank insolvency would be respected

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So, what exactly is the “hierarchy of claims” under this new FSB-dictated regime? Again we have to refer to another section (Key Attribute 5.1) to find the answer.  Which does indeed appear to support the traditional hierarchy of claims. Except for this stunning caveat –

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It is worth repeating –

“Resolution powers should be exercised in a way that respects the hierarchy of claims while providing flexibility to depart from the general principle of equal (pari passu) treatment of creditors of the same class…”

Moral relativism at its finest.

This is what has happened in Cyprus. While the final details are still evolving as to exactly how much Cypriot depositors holding more, or less, than €100k will have stolen from them, what is clear is that this FSB template for bail-ins in G20 nations or “jurisdictions” (EU), is the one being followed.

What is also clear, especially in light of recent revelations that Canada has expressly identified “bail-in” procedures in their 2013 Budget, is that all Western governments have, unbeknown to their citizens and without their consent, agreed to the imposition of the same new regime for managing insolvent banks.

A regime devised, and dictated by, an unelected central body.

Feel free to check these documents for yourself, here (pdf) and here (pdf).

Are you wondering who and what is the Financial Stability Board?

According to their website:

The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. It brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

A list of institutions represented on the FSB can be found here .

The FSB is chaired by Mark Carney, Governor of the Bank of Canada. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Got that?

A kind of “super regulator”. Chaired currently by a Goldman Sachs man. With membership comprising the central bankers, treasury department heads, and prudential regulators of 24 nations, along with the IMF, World Bank, and a cavalcade of others.

Including – and “hosted by” – the central bank of central banks.

The Bank for International Settlements (BIS).

According to its Articles of Association, the FSB is also funded by the BIS –

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According to its updated Charter (pdf), the FSB received its original mandate from the central bankers and Finance Ministers of the G7 nations in 1999.

It then received a “broadened mandate” from the “Heads of State and Government of the Group of Twenty” at a meeting in London on April 2, 2009 –

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At the same meeting, another now-infamous Goldman Sachs alumnus and current President of the European Central Bank, Mario Draghi, was appointed Chairman of the FSB

FSB - History (click to enlarge)

FSB – History (click to enlarge)

So… the hapless G20 heads of government, panicking in the midst of the GFC, gave the fonts of central banking wisdom at the FSB a “broadened mandate”, and “asked” them “to develop a policy framework to address the systemic and and moral hazard risks associated with systemically important financial institutions”, did they?

And under the consecutive chairmanships of Goldman Sachs men, these unelected bankers and bureaucrats – not one of whom warned of the approaching GFC – devised this “bail-in” policy for the whole of the G20, to solve the problem of Too-Big-To-Fail banks?

As the Machiavellian-minded so often say:

“Never let a good crisis go to waste”

See also:

Imagine A World With No Banks

The People’s NWO: Every Man His Own Central Banker

Canada Plans Cyprus-Style “Bail-in” Using Bank Depositors’ Money

29 Mar

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We have seen previously that there are many similarities between Australia’s economy, and that of Canada. In particular, the fact that, while both appeared to sail through the first wave of the GFC unscathed, the supposed economic strength of both is based on “houses and holes” – a housing bubble, and mining boom – financed by an over-leveraged banking sector.

Given these similarities, this news should be of real concern.

From The Economic Collapse blog:

Cyprus-Style Bank Account Confiscation Is In The New 2013 Canadian Government Budget

The politicians of the western world are coming after your bank accounts. In fact, Cyprus-style bank account confiscation is actually in the new Canadian government budget. When I first heard about this I was quite skeptical, so I went and looked it up for myself. And guess what? It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013” which the Harper government has already submitted to the House of Commons. This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada. “Economic Action Plan 2013” was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted. So exactly what in the world is going on here? In addition, as you will see below, it is being reported that the European Parliament will soon be voting on a law which would require that large banks be “bailed in” when they fail. In other words, that new law would make Cyprus-style bank account confiscation the law of the land for the entire EU. I can’t even begin to describe how serious all of this is. From now on, when major banks fail they are going to bail them out by grabbing the money that is in your bank accounts…

The following comes from pages 144 and 145 of “Economic Action Plan 2013” which you can find right here. Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…

Canada’s large banks are a source of strength for the Canadian economy. Our large banks have become increasingly successful in international markets, creating jobs at home.

The Government also recognizes the need to manage the risks associated with systemically important banks — those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.

So if taxpayer funds will not be used to bail out the banks, how will it be done? Well, the Canadian government is actually proposing that a “bail-in” regime be implemented…

The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

So if the banks take extreme risks with their money and lose, “certain bank liabilities” (i.e. deposits) will rapidly be converted into “regulatory capital” and the banks will be saved.

In other words, the banks will just be allowed to grab money directly out of your bank accounts to recapitalize themselves.

That may sound completely and utterly insane to us, but this is how things will now be done all over the western world.

Your humble blogger always finds it interesting to observe closely the language used by politicians throughout the Western world.

They all use the same phraseology, and cookie-cutter slogans –

“Canada’s large banks are a source of strength for the Canadian economy”

“strong prudential oversight”

“Economic Action Plan”

“Supporting Jobs And Growth”

Sound familiar?

Here’s one I really love, and expect to hear from our politicians very soon –

“This will reduce risks for taxpayers”

Er … hello?!

Those people with bank deposits – savings – that you plan on stealing to “bail-in” the banks … ARE the taxpayers.

Seems we have added a new variant to the slogans from the Ministry Of Truth in Orwell’s 1984:

1984 War is Peace

And …

SAVERS ARE NOT TAXPAYERS

One thing you can be sure of.

Some of us will be studying the upcoming May 2013 Budget for Australia rather closely.

FINMA: Stealing Depositor’s Money An “Elegant” Solution

27 Mar

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More from AFE, following on from yesterday’s client note:

…today we have been sent a paper from one of our clients which was distributed by [Swiss Financial Market Supervisory Authority] FINMA all the way back in June 2011 regarding the Swiss SIFI banking policy framework which calls stealing depositor funds to save a failing bank an “elegant” solution. The mindset which accompanies this attitude is frightening to contemplate.

Of note is that depositors are being referred to as creditors, and that deposits are considered debts of the bank. The theory they are operating on here is that any account which bears interest is actually an investment, subject to any risks the bank is willing to take. This is a huge paradigm change from the traditional view of most people who believe that the banks are there to safe-keep their funds.

The people have been led – like sheep to the slaughter – to believe in this. Now, which coven of high priests have preached that traditional view, down through the previous century or two, from their High Altars of Authority, do you think?

Simon Heapes, AFE’s Treasury Director says, “In Australia and NZ, you cannot have an account that does not accrue interest. They simply will not open the account unless you sign the agreement which indicates the account will bear interest. Therefore you have legally become an investor with the bank, and your deposits are liable for helping to bail out your bank if it gets into trouble. Because you are a joint investor with the bank therefore you have effectively given the bank your money for investment purposes which is an unknown risk by most depositors if the investment or investment entity (bank) fails!

Additionally, the moral hazard created here is that lawmakers are forcing the liabilities for risky decisions taken by bankers directly onto innocent depositors who ultimately pay with their savings for irresponsible behavior of bank decision makers.

Should these policies be written into EU law, it will make losses for large depositors a permanent part of future banking crises. Of course the timing of this is quite good, just in time to bail out banks in Spain, Portugal, and other EU countries where the crisis has been put into stasis until some genius figured out hey, you can just steal it from the depositors.

As I have long argued, the “modern” global monetary system is fundamentally flawed – that is, if you hold the view that a system which is designed to enslave the people and nations of the world through debt, maximise income and real asset wealth inquality over time, and so enable a small ruling class of elite “owners” of all the world’s assets and resources, is a “flawed” design. Of course, if you are one of those in that ruling class, then you will see the system as inherently good. And if you are one of the many species of remora, attached by your sucker to the shark’s belly, benefiting from a free ride, and protection, while living off either the scraps of your host’s feeding frenzies, or, by eating its faeces, then you too will see the shark-like, predatory monetary system as inherently good.

The flaws are structurally embedded in the design.  Thus, it can not be fixed. It must be replaced in toto.

These flaws include fractional reserve banking, endogenous money creation (ie, banks create new money by making loans, “reserves” if any are acquired via the central bank later), centralised (private) control, and above all, usury (offering and charging “interest” of any kind). It is a system that is, by design, destined for exponential “growth” (due usury) of currency supply, and ultimate collapse … with the elite money-lenders – the system architects – acquiring all the real assets of the world along the way. And thus, enslaving the world to their every whim.

We can now see more clearly that end coming into view.

NZ Insider: Australasian Banks Prepared To Steal Your Money “With A Few Mouse Clicks”

26 Mar

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From an Anglo Far East client note (“no”, the client is not me, and “no, sorry”, no link):

Cyprus Steals the Money

At AFE, we have said many times that when governments become desperate, the record of history is very clear – they confiscate the wealth under their jurisdiction. I am sure there are many who thought this could never happen in today’s modern economy, yet here we are, and it is happening.

A bank holiday is called, which prevents depositors in Cyprus from accessing their funds. Next, Cyprus announces that it is in negotiations with the ECB and IMF for a bailout of its biggest banks to the tune of $17B. The ECB/IMF offer to cover $10B, and Cyprus is told to come up with the rest.

The first idea was to call a bank holiday, and before depositors could get to their funds, depositors would have up to 10% of their wealth confiscated. This measure was rejected by the Cypriot Parliament.

The ECB/IMF then gave Cyprus a deadline of today to figure out a solution accompanied by the threat of cutting off rolling credit lines, therebyforcing insolvency of one or more of its largest banks and collapsing the banking system.

The end result has been the worst nightmare of depositors.If you are a depositor with more than 100,000 Euro, they will be taking up to 40% directly out of your account before you have access to your money again. The total amount of the theft: Up to €4.2 Billion Euros

“Deposits above 100,000 Euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalize Bank of Cyprus.” – Reuters

We spoke to one of AFE’s Cyprus clients on the phone today. Comments included, “They are very afraid. The banks are still closed, and they are worried there will be bank runs.” This client also believes that once banks re-open, they will limit the amount allowed to be withdrawn in order to avoid a bank run.

New Zealand Prepares to Steal the Money

Last week we notified our clients that plans have been in place for some time in New Zealand to be able to declare a bank holiday and instantly haircut all depositors. As it turns out, this can be done with as little as “a few mouse clicks.”

AFE’s inside source (a senior developer for one of New Zealand’s largest banks) confirms that these plans started some time ago. According to this source’s personal knowledge of the system’s implementation, which facilitates instant theft on behalf of the government, this project was initiated years ago. Interestingly, it was the Reserve Bank of New Zealand that instructed all banks to put this system in place as well as providing the deadline as to when it had to be implemented.

AFE’s Duncan Cameron says, “You don’t build bridges to nowhere with no plan on walking them.”

“If depositor’s funds are protected up to €100K, and anyone holding deposits over that amount has to bail out their bank if that bank gets into trouble, it will set a precedent for other banks’ depositors worldwide who have deposits over the insurable amounts within those nations!

In Australia and the USA, the insurable amount is $250K for any single entity (person); therefore, any one entity over the insurable limit could be subject to similar scenarios.

Think you won’t be affected, that you’ll not have any of your money digital bookkeeping entries stolen to prop up a Too Big To Fail bank, because you have less than $250K there?

Think again.

As we saw in March 2012, the Australian government’s Bank Deposits Guarantee Is No Guarantee At All:

How many of them [bank customers] would know, for example, that the standing appropriation to meet any initial payout of deposits is limited to $20 billion per failed bank?

It might seem like a lot, but it pales when compared to about $200bn in eligible deposits for each major bank.

…the initial payout is effectively capped by legislation at $20bn, albeit with provision for the government to go back to the parliament for more.

There is no mention of any of this in Swan’s press release.

After reading that document, you’d come away thinking that the government will cough up for pretty much all bank deposits of less than $250,000 in full.

In fact, only one-tenth of all eligible deposits (ie, under $250K) would be protected.

At best. If you’re lucky.

The important outtake from all of this?

“Trust” in the banking system – and government – is gone.

The events of recent days in Europe all tends to suggest that Cyprus is just a test case.

Or as Eurogroup head, the Dutch Finance Minister let slip, Cyprus is a template for Europe.

And the rest of the West.

Cyprus, This Is How To Deal With Bankers Who Want You To Take A Loss

20 Mar

From the movie “Casino”. How appropriate.

WARNING: Strong language –

“We know what you do, don’t we Charlie. You f**k people out of money and get away with it.”

“Possession Is Nine Tenths Of The Law” The New Rule For Bank Deposits

20 Mar

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Pandora’s Box has been opened.

And all the demons of lawlessness – shrieking “Do what thou wilt” and “Might beats Right” – have flown out.

From the New Zealand Herald:

Kiwis with money in the bank could see their nest eggs and savings dwindle in a government move the Greens say is a “Cyprus-style solution” to help out failing banks.

New Zealand banks are readying their IT systems for Open Bank Resolution, a Reserve Bank policy that in extreme cases like insolvency would see a bank’s losses shouldered in part by its shareholders and creditors – including everyday depositors.

The Reserve Bank has the power to freeze bank deposits but up to now has lacked the technical infrastructure to implement it – hence their requirement for banks with retail deposits of more than $1 billion to change their systems and meet their requirements by July 1.

Under the policy, which can only be activated by the Minister of Finance, if a bank fails a statutory manager is appointed to calculate the bank’s liabilities.

The statutory manager can then freeze a percentage of customers’ bank deposits to cover those liabilities before it reopens the next trading day.

But the Green Party’s co-leader Russel Norman said OBR was a “Cyprus-style solution” that would see small depositors suffer to fund big bank bailouts.

“Bill English is wrong to assume everyday people are able to judge the soundness of their bank,” he said. “Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming.

Prime Minister John Key said the OBR policy was a “last-resort facility” and when told that few people seemed to know about it he responded that it was unlikely to be used.

Yeah right.

Where have we heard that before?

Oh yes, that’s right. Cyprus.

Where the Finance Minister told the people on March 1st that: There is really no more stupid an idea even to consider […] a haircut on bank deposits.”

Only days later, a 10% “haircut” on deposits is a very ‘live’ option.

Now you know just how much you can trust the politico-bankster “unholy alliance” to safeguard your savings.

There is an old saying: “Possession is 9/10ths of the law.”

Clearly, this “logical rule of force that has been recognized across ages” is now the new (old) standard for law and order.

They have it. And you don’t.

Suggestion.

Find somewhere else to stash your cash.

EU Madness: Bank Deposits Stolen For Bailout Of Cyprus

17 Mar

Cross-posted from a project update on Professor Steve Keen’s MINSKY Kickstarter fundraiser (please donate now, ends tomorrow a.m.).

This is big. HUGE:

Madness in the European Union

I write a weekly column for the Australian online newspaper Business Spectator. Today’s startling news out of Europe will be this week’s topic, and given how topical this is I thought I’d share my reactions with Kickstarters:

Europe Goes Troppo

John Lennon’s best line in a lifetime of song-writing was “Life is what happens when you’re busy making other plans”. I had planned today to write about the excellent Atlantic Monthly The Economy Summit 2013 conference I spoke at in Washington on Wednesday, where it seemed that senior figures in the US were finally starting to realize that private debt, not public, was the main game in a debt-deflation.

Then “I read the news today, oh boy”: I woke at 4am to the news that the EU has confiscated 10% of depositors’ funds in its “bailout” of Cyprus. Lennon didn’t go far enough. It seems political suicide is also what happens when you’re busy making other plans. If there was one lesson that I thought the world had learnt from the Great Depression, it was the need to guarantee depositors’ funds.

So much for that fantasy. Now the EU has shown that its obsession with austerity has gone so far that even this historical wisdom has been abandoned. Not only are depositors’ funds not guaranteed, they are being lost even in banks that have not (yet) failed. Many banks are likely to fail however, if depositors come to believe—as this action gives them every right to believe—that their savings are not safe in banks. The public’s first response will be to no longer trust the digital 1s and 0s in their bank statements, and to demand their funds in cold, hard cash. The only way to do this is to front up at the bank, present it with a withdrawal equivalent to the deposit balance, and wait for the teller to count out the notes.

The public will be waiting a while: the cash currently simply doesn’t exist. Currency constitutes only a tiny percentage of the aggregate money supply—whether defined as that found in bank at-call cheque and savings accounts (M2), or including term deposits and other not-at-call accounts (M3). If everyone wants it, then only one in twenty will get it, if Europe’s figures are at all comparable to America’s.

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That’s why a collapse in confidence in deposits is called a bank run: only those who run first to the bank get their money.

Only Cypriots — and Russians, who apparently put substantial funds in Cyprus, probably in search of either a safe haven or high returns (that’s one trivia question I don’t know the answer to) — have an immediate motivation to demand cash, but they won’t be able to, thanks to a “bank holiday” in Cyprus on Monday, and withdrawal restrictions from Tuesday on.

But what about depositors in the other Mediterranean states—in fact, anywhere other than Germany? I can’t imagine them not queuing at their banks on Monday, and in large numbers.

With the inability of individuals to freely withdraw funds will come a political credit crunch. Commerce relies upon the easy transfer of funds from buyer to seller. Companies can’t have these restrictions imposed on their accounts without causing commerce to grind to a halt, but surely their suppliers—particularly tradesmen and small businesses—are going to demand cash payments in future. What happens when companies start demanding cash from their banks, rather than relying upon e-commerce?

What will happen to e-commerce after this? Would you trust the swipe of a card for a cappuccino now, or would you demand coin—even if they were Euro coins? And what on earth will money markets make of this? What will a Euro be worth on Monday morning?

Goldbugs will rejoice I am sure—here comes the currency apocalypse they have eagerly anticipated. The Bitcoin community is going to rejoice as well—theirs is one form of e-commerce that is likely to prosper after this insane act. The great attraction of Bitcoin is that it is the creature of no State, and therefore it can’t be confiscated by one.

There will be political demands for the return to national currencies: better the national State you can control than the supra-national State that controls yours. I can’t think of any other act that could do more to bring the Euro to an end than the news that a country has had 10% of its deposits confiscated, because that nation was foolish enough to cede the right to issue its own currency to the European Union a decade ago.

This will also surely stir the Russian Bear. I have no idea which Russians have funds that are now being used to bailout European banks, but I doubt that Vladimir Ilyich … I’m sorry, I mean Vladimir Putin … will take kindly to this effective seizure of Russian assets. Putin certainly has to act: his strongman image in Russia would be in tatters if he did not. What might his comeback be—turning off Russian gas supplies to Europe perhaps, until Russian depositors are repaid? And probably in dollars rather than Euros? What then in Europe, if strongman tactics force compensation for Russians, but none is forthcoming for Cypriots?

The most ominous political portent lies in the legitimacy this will bestow on the Far Right. This betrayal of the people of Cyprus by its politicians and bureaucrats will be seized upon by the fascist (and leftist) parties throughout Europe. The centrist parties whose politicians and bureaucrats have insisted on depositors contributing to a bank bailout to appease German voters have just thrown the center away.

God knows what the long term consequences will be, but if I had to identify one single act that could lead to a rerun of the political chaos of the 1930s in Europe today, this would be it. I began this post with John Lennon. Maybe the story will end with the resurrection of Vladimir Ilyich Lenin. But in the interim I expect that the Right—and most immediately, Golden Dawn in Greece—will make the most political capital out of Brussels’s incredible folly

I’ve written this quite literally “up in the air” — flying from Washington to Los Angeles — wondering what else will have occurred by the times I touchdown. Surely there will be a reaction by Cypriots today—and demonstrations elsewhere in Europe by both Left and Right. These might cause some backdown by the idiot bureaucrats and politicians who forged this plan, but even then it will be too late: the damage to the credibility of the Euro and the entire European banking system will already have been done.

Monday is going to be a very interesting day in Europe. And Tuesday in Cyprus? I would not like to be a bank teller on that day.

As I’ve been saying…

Do not – not for a moment – think that this will not impact us here in Australia.

Wars have begun over less.

See also –

UPDATE:

It has begun. From BBC News:

Cyprus bailout: Man threatens bank with bulldozer

People in Cyprus have reacted with shock to news of a one-off levy of up to 10% on savings as part of a 10bn-euro (£8.7bn; $13bn) bailout agreed in Brussels.

Savers queued at cash machines amid resentment at the charge, while co-operative credit societies shut to prevent a run on deposits.

At one Kyperounta Co-operative bank branch, a frustrated man parked his bulldozer outside, apparently threatening to break in.

UPDATE 2:

excavator cyrpus_0

UPDATE 3:

From Zero Hedge (emphasis in original):

But it doesn’t stop there: a partial “bail-in” of junior bondholders is also possible, as for the first time ever the entire liability structure of a European bank – even if it is a Cypriot bank – is open season for impairments. The logical question: why here, and why now? And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe’s biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe’s disunion.

For the real response, look to Russia:

The island’s bailout had repeatedly been delayed amid concerns from other EU states that its close business relations with Russia, and a banking system flush with Russian cash, made it a conduit for money-laundering.

“My understanding is that the Russian government is ready to make a contribution with an extension of the loan and a reduction of the interest rate,” said the EU’s top economic official, Olli Rehn.

Almost half of [Cyprus’] depositors are believed to be non-resident Russians, but most of those queuing on Saturday at automatic teller machines to pull out cash appeared to be Cypriots.

While “saving”, pardon the pun, yet another insolvent country merely has the intent of keeping it in the Eurozone, and thus preserving Europe’s doomed monetary block and bank equity for a little longer, this idiotic plan will achieve two things: i) infuriate not just Russians but very wealthy, and very trigger-happy Russians. The revenge of Gazpromia will be short and swift, and we certainly would not want to be Europeans next winter when the average heating level of Western European will depend on the whims of Russian natural gas pipeline traffic; ii) start a wave of bank runs first in Cyprus and soon everywhere else that has the potential of being the next Cyprus.

Now the only thing unknown is Russia’s response:

Corporate tax rates in Cyprus will rise to 12.5 percent to 10 percent as part of the deal, Dijsselbloem said. Rehn told reporters that Russia, whose banks have loaned as much as $40 billion to Cypriot companies of Russian origin, would ease terms on its existing loans to Cyprus as the rescue unfolds. Cyprus’s finance minister is scheduled to fly to Moscow on March 20.

What is known, however is that Cypriots have taken the news in stride…. and to their local ATM machine, which sadly is showing the following message: “Your transaction has been cancelled due to a technical issue. This ATM cannot complete withdrawals at this time” (courtesy of Yannis Mouzakis).

Cyprus ATM two_0

It didn’t take long before the Cyprus Cooperative bank issued a statement saying “some ATMs run out of cash” – by some they likely mean all as the entire country is now gripped in a full force depositor run.

Congratulations Cyprus savers – you were just betrayed by both your politicians, and by Europe – sorry, but you are the “creeping impairments” in the game known as European bankruptcy. And so is anywhere between 6.75% and 9.9% of your money, which you were foolish enough to keep with your banks (where at least you were compensated with a savings yield of… 0%).

More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank.

UPDATE 4:

From Zero Hedge:

As the President of Cyprus proclaims to his people that “we’ should all take responsibility as his historic decision will “lead to the permanent rescue of the economy,” it appears that the settled-upon 9.9% haircut is a ‘good deal’ compared to the stunning 40% of total deposits that Germany’s FinMin Schaeuble and the IMF demanded.

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