Respectfully submitted by Lawrence E. Rafferty- Guest Blogger
The recent news about Cyprus banks confiscating depositor’s funds sent chills throughout the financial world here and abroad. I couldn’t believe that the plan in Cyprus hinged on the idea that the bank could just steal customer’s funds to balance the bank’s books. I muttered to myself when I read the story that something as crazy as that couldn’t possible happen here in the United States. Unfortunately, I learned that the plan to pull a Cyprus type grab here was already in the works.
“A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds. ” NationofChange
The above article explains that most of us do not realize that when you deposit money in a bank, that it becomes the property of the bank and we become unsecured creditors of the bank! “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?” NationofChange
If I deposit $1,000 dollars in my local bank, I trust that the funds are safe and protected by FDIC insurance and that even if the bank fails, I will get my money back. Under the plan listed above, we may not even be able to fall back on the FDIC insurance coverage. The FDIC-Bank of England plan would supersede our FDIC coverage and we would be relegated to become a “shareholder” in the failing bank or its successor entity. Let me see if I understand this scheme. The bank who is failing due to mismanagement or due to risky investments could steal my funds and force me to accept stock in a company led by poor businessmen with an even poorer business record! If you are brave enough, check out the full FDIC-Bank of England plan here.
Cyprus wasn’t the only place where a bankster grab of deposits was put into place or is being discussed. It is being discussed in New Zealand as well. “New Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:
The National Government [is] 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 . . . .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.” NationofChange
To be clear, this joint FDIC-BOE plan would need enabling legislation to be passed before it could become the law of the land. However, the bankruptcy laws have put unsecured creditors, which depositors would be labeled under the plan, lower in seniority to the claims of derivative counterparties which would mean that the very parties who are causing the bank to fail, could collect before the innocent depositors.
“In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.” NationofChange
This so-called plan has been labeled a wealth tax in Cyprus, but the United States banks hold the deposits of the poor and middle class and those deposits would be at risk if this type of plan is actually activated. If this type of plan was ever activated or authorized by Congress, why would anyone ever deposit their funds in one of the major banks that could be at risk of failing due to risky derivative investments when those very deposits could be at risk? If the bank files for bankruptcy after depositors funds are confiscated, would depositors be left out in the cold entirely?
This type of bank bail out is an end run on depositors and on the American public. I can only guess why the corporate owned mass media has not been carrying this story. I do not think that I would every put any money in any of the big multi-state banks in light of this potential nightmare of a bailout. I would love to see the Senate hold a hearing to question FDIC officials on this joint plan. While the wealthy use the banks, a good portion of their wealth is in other investment vehicles and therefore the brunt of the bailout could be borne by you and me. Of course the banks will claim that we would receive stock in lieu of the confiscated funds, but can you pay your mortgage bill with stock from a failing bank?
What would you do if your bank confiscated your hard earned deposits to pay their bills? What happened to taking personal responsibility for their mistakes? Too big to fail, too big to jail and now, too big to cover their own losses! Is it any wonder that the banks want no part of Dodd-Frank and the Consumer Protection Agency?
BK,
The problem is she did not get to choose her card carrier. It is through Chase, and there is no Chase bank or ATM anywhere near us. That means that if she uses any non-Chase ATM, she still gets stuck with the ATM fee.
She gets so little on SSI that she cannot justify opening an account. I worry about what is going to happen to her after I am gone. My bottom line is that banks are charging the government for operating the service, then skimming off fees from the client for using the cards.
“our money is
theretheir money …”rafflaw,
Hypothesis: If statutes say our money is there money, that is a taking without just compensation or due process of law.
Thus, the statutes that TAKE our money and give it to banksters is constitutionally infirm.
Darren,
Larry is fine!
OS, Your daughter should shop for a credit union that has a free atm near her. My credit union is in a city several miles from my home but has a network of free atms, including one not far from me. The membership fee required by the credit union is generally not that oppressive, especially considering the atm fees from the bank. The membership fee would be kept in her savings account until she closes the account, then she would get it back.
Will credit unions succumb to the same chicanery?
“Real evil is afoot.” -Dredd
Yep.
Rafflaw,
You answered the question:
(Why Is The Government Conditioning Us To Austerity?). Real evil is afoot.
OS I may have missed it but is she unable to have a bank so she can do direct deposit? My bank has a debit card that has no costs associated with it so my SSD goes directly into my acc;t, and has very month for the past 30 years without missing a date (the gov;t is excellent with this and medicare, and paying on time). I then use either cash or the card all month. I do not pay any extra fees for the card.
BettyKath I would be very surprised if they don’t send you the check you missed once they are aware of it.
RTC,
are you suggesting that banks being able to grab depositors funds to correct their own errors and bad investments is a good thing?
Some of us, who have been to court (for instance) do not have to worry about banks taking away our deposits. See? Silver lining. 😈
Otteray:
I am a little torn on your premise.
The barter system is fundamentally better than EBT cards. That people sometimes used food stamps to buy other things than food might be a good thing. On the other hand, the purpose of them was for food.
I might add people are still using EBT card credits for barter, it is just a little less convenient.
Elaine:
I too thought I knew approximately how banks collect deposits and loan out money; little did I realize that what they do is legally authorized gambling with money lent out that they don’t have, typically 900% of the actual money they have. The FDIC is the supposed safety net in case a depositor’s money is wiped out by a bank’s bankruptcy, but even that is a sham, because although it could cover an individual bank’s insolvency, the FDIC fund is a tiny fraction of what it would take to cover all insured depositors money if and when the system collapses are there are bank runs all over the place.
This video explained it rather clearly; the first 3/4th of it are simply factual expositions of how it works, the last portion of the video are more conjectural and I don’t particularly agree with its summation or suggested cures to the problem.
I think Frank Zappa had something to say about this fourty years ago. There was that comedian relatively more recently as well. What was his name again? Oh yeah, Bill Hicks. He checked out a little early too.
Go back to sleep. You might be dreaming?
This post is a little bit out there even for Turley Land. I didn’t say that was a good thing or a bad thing. Just saying…
Perhaps Jesus, the “children”, and that succulent lamb dinner put Turley in the nap zone and Rafferty figured he should bring the curveball hopeing it catches the outside corner of the thinly sourced plate on the first pitch.
I think the umpire is currently about ready to make the call on the pitch and the fans that have been paying attention are in the process of standing up.
Will it be 1 and 0
Or 0 and 1?
Any players on base? What inning is it?
Should prove to be am interesting at bat.
What’s the score BTW?
rafflaw,
Thanks for this information. I’ve done a lot of reading about banking shenanigans/stories–but hadn’t heard about this. I keep my savings in an indepependent, mutually owned bank.
Well guys, as you know, there is no such thing as a free lunch. So stop your whining, tighten your belt and get back to work.
Fiction, no. Based on agreement, yes. Or an idea, backed by confidence. Both are foul play. The former is more overt & therefore blatant. On tends to attack the blatant crimes first, because, if you don’t, any criminal can & will walk over you & society. Then you go after the covert criminal too.
Money is a fiction anyway – it is only worth something because everyone agrees it is worth something.
Is it better or worse for you, if your bank account has a 10% haircut, or if your goverment is broken and decides to dilute their currency by printing 11% more of it?
LK,
Yes on those EBT cards you see at the market. A lot of them are probably SSI or SS cards, but food stamp coupons are a thing of the past. That is probably a good thing. The coupons were often a means of barter. Drugs, cigarettes, beer, and other merchandise that the coupons could not legally be used for. At least the EBT cards have to be scanned at the store and most stores have their computer/cash register systems set to reject attempted purchases of forbidden items.