Confiscating the customer deposits in Cyprus banks was not a one-off. It could happen here*.
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.
[...] 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. The FDIC is an insurance company funded by premiums paid by private banks.
[...] the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability... An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock].”
Full article: HERE
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A precedent had been set in Cyprus. If anyone think this is just a policy mistake, then this perception couldn't have been much more mistaken and naive. When there's an imminent failure of this system (and it is imminent), they will always have this option (out of many) available now.
It doesn't matter if the deposits are guaranteed or non-guaranteed; the difference is one of degree. This is called burden-sharing. We share their losses while they keep the profits. Of course, for them this is just one of many ways of doing it.
Unless one is living in the deep jungle, the banking system works the same everywhere in the world. Remember, the system must be protected first, at all cost.
So, the 'here*' taken in this context does not mean only in US & UK, but anywhere in the world. It took life more than 30 years to teach me the meaning of naive. The world we lived in today is certainly not a good place for that. Let's reserve naivety only for children.
We have to keep this in mind...
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.
[...] 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. The FDIC is an insurance company funded by premiums paid by private banks.
[...] the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability... An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock].”
Full article: HERE
-------
A precedent had been set in Cyprus. If anyone think this is just a policy mistake, then this perception couldn't have been much more mistaken and naive. When there's an imminent failure of this system (and it is imminent), they will always have this option (out of many) available now.
It doesn't matter if the deposits are guaranteed or non-guaranteed; the difference is one of degree. This is called burden-sharing. We share their losses while they keep the profits. Of course, for them this is just one of many ways of doing it.
Unless one is living in the deep jungle, the banking system works the same everywhere in the world. Remember, the system must be protected first, at all cost.
So, the 'here*' taken in this context does not mean only in US & UK, but anywhere in the world. It took life more than 30 years to teach me the meaning of naive. The world we lived in today is certainly not a good place for that. Let's reserve naivety only for children.
We have to keep this in mind...
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