Our financial system is crumbling this week.

[AWvsCBsteeeerike3]

I'm long term bullish on this. I'll be buying if panic sets in.

As are investorsI think.

Feds making a statement Wednesday. Likely to be negative, but QE still going strong, so....

[Joe Shlabotnik]

While Cypress banks are used money laundering, it sounds like the plan here very explicitly chooses to make normal bank account holders collateral damage. Further, announcing that authorities may decide to seize bank deposits is a great way to generate bank runs. There's a good reason why bank deposits are generally fully guaranteed. To make the system work, this needs to be paired with tight regulations on lending, but that's pretty much fallen apart, especially when you can evade such regulation by putting you money in places like Cyprus.

New agreement takes a more traditional approach.

Depositors in the bank with accounts holding more than 100,000 euros would also be heavily penalized but the exact amount of those losses would need to be determined.

The plan to resolve Laiki Bank should allow the Bank of Cyprus, the country’s largest lender, to survive. But the Bank of Cyprus will take on some of Laiki’s liabilities in the form of emergency liquidity, which has been drip-fed to Laiki by the European Central Bank. That short-term financing, which the E.C.B. had threatened to cut off on Monday, is expected to continue.

Depositors in the Bank of Cyprus are likely to face forced losses rather than any form of tax. That plan, which set off outrage last week in Cyprus and as far away as Moscow, has now been dropped entirely.

[Mary1966]

Fox News

"What's amazing here, I think, is how small Cyprus is and how relatively small the problem is. The bailout total, that you mentioned, is about a quarter of Apple's cash-on-hand. I mean, this is one country that Apple could purchase. It could own the island and call it, you know, iCyprus, or something. And have all this cash left over."

[AWvsCBsteeeerike3]

http://seekingalpha.com/article/1306931 ... view&ifp=0

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few eurozone "troika" officials scrambling to salvage their balance sheets. A joint paper by the U.S. Federal Deposit Insurance Corporation and the Bank of England dated Dec. 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.

...

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.

...

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.

...

If our IOUs are converted to bank stock, they will no longer be subject to insurance protection but will be "at risk" and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008.

...

The Cyprus haircut on depositors was called a "wealth tax" and was written off by commentators as "deserved," because much of the money in Cypriot accounts belongs to foreign oligarchs, tax dodgers and money launderers. But if that template is applied in the U.S., it will be a tax on the poor and middle class. Wealthy Americans don't keep most of their money in bank accounts. They keep it in the stock market, in real estate, in over-the-counter derivatives, in gold and silver, and so forth.

All fun stuff.

[Joe Shlabotnik]

What goes around comes around. We have gone back to the future where any one can be wiped at in a bank run at any time.

Cool.

[longhornbaseball]

What goes around comes around. We have gone back to the future where any one can be wiped at in a bank run at any time.

Cool.

No we haven't. The situation in Cyprus isn't at all comparable to the US.

[Joe Shlabotnik]

What goes around comes around. We have gone back to the future where any one can be wiped at in a bank run at any time.

Cool.

No we haven't. The situation in Cyprus isn't at all comparable to the US.

Seeking Alpha isn't a tinfoil type of site. The author of the quoted article explains, with supporting documentation from FDIC and BOE documents that a shift has taken place at that level in how they view bank deposits and too-big-to-fail institutions. There is plenty of evidence out there to indicate FDIC no longer thinks it is necessary to insure all deposits. Read the article and the links.

[AWvsCBsteeeerike3]

What goes around comes around. We have gone back to the future where any one can be wiped at in a bank run at any time.

Cool.

No we haven't. The situation in Cyprus isn't at all comparable to the US.

Right now it's not comparable because the banks aren't in trouble.*

But, they're (FDIC and BOE) clearly working on resolution strategies should a resolution be necessary, as it was in 2008, for American/English firms/banks. It's not comparable to Cyprus because no resolution is required as of now. But, the resolution they propose is comparable, if not worse, for those with money in the bank.

*There's also a nice little write up in there about the massive amounts of derivatives banks hold that pose a risk. I don't know enough about the positions to know if they are truly risky or not. So, I didn't include any quotes....

[greenback44]

What goes around comes around. We have gone back to the future where any one can be wiped at in a bank run at any time.

Cool.

No we haven't. The situation in Cyprus isn't at all comparable to the US.

Seeking Alpha isn't a tinfoil type of site. The author of the quoted article explains, with supporting documentation from FDIC and BOE documents that a shift has taken place at that level in how they view bank deposits and too-big-to-fail institutions. There is plenty of evidence out there to indicate FDIC no longer thinks it is necessary to insure all deposits. Read the article and the links.

Brown doesn't distinguish between unsecured creditors of the holding company (sometimes called "the group") and unsecured creditors of the bank, probably because she's a willfully obtuse kook. The difference between the holding company and the banking entity is a crucial difference in the US. The primary point of the FDIC PDF is that the FDIC can take over the whole company, instead of merely the regulated bank subsidiary.

ETA, driving the point home, from the FDIC PDF:

47 Similarly, because the group remains solvent, retail or corporate depositors should not have an incentive to “run” from the firm under resolution insofar as their banking arrangements, transacted at the operating company level, remain unaffected. In order to achieve this, the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.

[AWvsCBsteeeerike3]

If that is jsut a giant hoax and she was completely wrong from the start, my bad. She seemed legit on huff post, so I just posted the article.