Bank Depositor “Haircuts”: Grand “Financial Theft” is the Money Market’s “New Normal”
On March 29, Cyprus Mail said banks opened Thursday. They did so amid calm.
Long lines queued. People waited patiently. A feared stampede didn’t materialize. Whether it’s the calm before the storm remains to be seen.
Looting Cypriot bank accounts reflects the new normal. It set a precedent. It did so for Europe. More on that below.
Grand theft reflects official policy. Money is made the old-fashioned way. It’s stolen. Nothing’s done to stop it. Corrupt politicians and regulators permit it. They do so for benefits they derive.
Scamming investors is commonplace. Goldman Sachs derisively calls them “muppets.”
MF Global’s CEO Jon Corzine formerly headed Goldman Sachs. He looted customer accounts. He did so brazenly.
He used client money to speculate. More went for internal purposes. Much went to cover debt obligations and losses. Top firm executives made millions. They did so at customers’ expense.
Financial reform accomplished nothing. Grand theft is institutionalized. Europe’s no different from America. Anything goes is policy.
Banks deposits were considered safe. No longer. Eurocrats changed things. Euro Group head Jeroen Dijsselbloem explained.
Expect more wealth extracted from depositors. Cyprus established a template. Bank accounts in other troubled economies aren’t safe.
“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that,” he asked? “What can you do to recapitalize yourself?’ ”
“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.”
“The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take.”
In late February, ECB Executive Board member Benoit Coeure suggested raiding depositor accounts for bail-ins, saying:
“There needs to be an appropriate burden-sharing….because we need to achieve debt sustainability.”
At the time, he suggested not doing it across the board. Whether he meant it isn’t clear.
He added that he doesn’t “pre-judge any instruments because the vocabulary matters, and there are many ways to achieve burden-sharing.”
It bears repeating. Grand theft is official policy. Even bank accounts aren’t safe.
Market analyst Marc Faber believes “governments one day (will) take away 20 – 30% of (his) wealth.” There’s no place to hide.
German Finance Minister Wolfgang Schaeuble proposed a 40% haircut on all deposits. So does IMF head Christine Lagarde.
Cypriot Finance Minister Michalis Sarris said large uninsured Laiki Bank depositors could lose up to 80% of their money. Other European depositors race similar risks. So do people elsewhere.
Some may lose everything. It’s the new normal. Personal savings are up for grabs. Bank bailouts will be borne on the backs of ordinary people.
Think it can’t happen here? Think again. There’s no place to hide. Ellen Brown explained. Banks legally own depositor funds, she said.
“Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.”
Banks once repaid depositors on demand. A joint December 10, 2012 FDIC-Bank of England (BOE) paper changed things. Plans to loot customer accounts were made earlier.
The Bank for International Settlements originated them. It’s the privately owned central bank for central bankers. Major ones have final say.
Looting depositor accounts is policy. Cyprus isn’t a one-off. Guaranteed insured deposits don’t matter. They’re up for grabs like all others. It’ll be done clever ways or outright.
Brown said the FCIC-BOE plan involves converting deposits (IOU promises to pay) into bank equity. They get our money. We get bank stock.
Ready cash on demand is gone. Whether it’s ever returned, who knows. Take the money and run looks more than ever like policy. Depositors anywhere may be hung out to dry.
Even gold and silver in safety deposit boxes aren’t safe. Not in America. Homeland Security told banks in writing. It may inspect their contents on demand.
Under Patriot Act provisions, it may seize them with no warrant. It can do so anywhere. Banco de Mattress isn’t safe.
Investor Jim Rogers said “run for the hills now. I’m doing it.” Cyprus is no one-off.
“I want to make sure that I don’t get trapped,” he said. “Think of all the poor souls that just thought they had a simple bank account.”
“Now they find out that they are making a ‘contribution’ to the stability of Cyprus. The gall of these politicians.”
“If you’re going to listen to government, you’re going to go bankrupt very quickly.”
“I, for one, am making sure I don’t have too much money in any one specific bank account anywhere in the world, because now there is a precedent,”
“The IMF has said ‘sure, loot the bank accounts. The EU has said ‘loot the bank accounts, so you can be sure that other countries when problems come, are going to say, ‘Well, it’s condoned by the EU. It’s condoned by the IMF. So let’s do it too.’ ”
The Daily Bell asked “What Is The REAL Euro End Game? It is time to apply the free-market to bank depositors.”
Strategy involves shifting responsibility from taxpayers to depositors. Things ahead won’t be the same. Eurocrats’ policy is wrongheaded. They’re deepening crisis conditions, not alleviating them.
They believe achieving “full-on political union” depends on it. Their well-documented comments reflect it.
“….Cyprus shock and subsequent statements are not only deliberate, but have contributed to spreading uncertainty throughout Europe.”
“Now people no longer trust their banks, contributing to their destabilization.”
“If you have a bank crisis, the last thing you want to do is further destabilize trust and confidence in the system. But Brussels Eurocrats have done just that.”
“Don’t think it was a mistake. If one accepts that line of thinking, the ramifications are serious and deep from a sociopolitical, political and investment standpoint.”
The Economic Collapse blog said global elites plan to loot bank accounts. Don’t be surprised when they steal yours.
“They are already very clearly telling you that they are going to do it.” Your money is theirs. It’s up for grabs on demand.
People put money in banks for safety. Removing it “jeopardize(s) the entire system.” Cyprus is a tip of a giant iceberg. Major global banks are highly leveraged. Many are insolvent.
When their bets pay off, they win. When they don’t, we pay. Wealth confiscation is now policy. Commerzbank chief economist Joerg Kraemer urges a “tax rate of 15 percent on (Italian) financial assets.”
It’s “probably enough to push (government) debt below the critical level of 100 percent of gross domestic product,” he said.
New Zealand Finance Minister Bill English proposed across the board depositor “haircut(s)” in case of major bank failures.
Britain’s Daily Mail headlined “One of the nastiest and most immoral political acts in modern times,” saying:
“People who rob old ladies in the street, or hold up security vans, are branded as thieves.”
“Yet when Germany presides over a heist of billions of pounds from private savers’ Cyprus bank accounts, to ‘save the euro’ for the hundredth time, this is claimed as high statesmanship.”
“It is nothing of the sort….It has struck fear into the hearts of hundreds of millions of European citizens, because it establishes a dire precedent.
If Eurocrats can loot Cyprus, why not anywhere.
“This is the most brutal display since 2008 of how far the euro-committed nations are willing to go to save the tottering single currency.”
“It shows that the zone’s crisis will run and run to the grievous disadvantage” of most everyone.
“Surely the euro cannot long survive by such anti-democratic means. It certainly does not deserve to.”
Graham Summers says “Europe is out of options and out of money.” It’s “totally and completely bust.”
It’s banks are highly leveraged. They can’t raise capital “because no one in their right mind wants to invest in them….”
“European nations are bankrupt because AGAIN no one in their right mind wants to buy their bonds UNLESS they believe they can dump their investments on the ECB at a later date. Who is the greater fool there?”
Europe isn’t fixed because enough capital isn’t there to do it. “Europe and its alleged backstops are out of money. This includes Germany, the ECB, and the mega-bailout funds such as the ESM (European Stability Mechanism).”
The ECB is “chock full of garbage debts.” It’s insolvent. It can print money, “but once the BIG collateral call hits, (it’s) useless because (what’s needed) would implode the system.”
“What could go wrong?” Virtually anything. “It’s only a matter of time before (crisis conditions reach) hyperdrive, and we have an event even worse than 2008.”
Zero Hedge says Russia’s “next in line to restrict cash transactions. (They’re) taking a page from the Europeans’ book.”
Russia Beyond the Headlines said “Russia to ban cash transactions over $10,000.” It plans to “slash the amount of cash in domestic trade.”
It may do so by 2015. It’s “expected to boost” bank reserves “and put a damper on (its) shadow economy. However, the middle class will most likely end up having to pay the price for the scheme.”
According to Zero Hedge, leaders realize that “limits of fiscal and monetary policy have been reached.”
They’re “now changing rules, limiting freedom, and (instituting) outright confiscation (as) the only way to maintain a status quo.”
Doing so reflects predatory capitalism’s failure. It’s a house of cards. It’s heading perhaps for eventual collapse. At risk is whether it takes humanity with it when it does.
Stephen Lendman lives in Chicago. He can be reached at firstname.lastname@example.org.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
His new book is titled “How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War”
NICOSIA (Reuters) – Big depositors in Cyprus’s largest bank stand to lose far more than initially feared under a European Union rescue package to save the island from bankruptcy, a source with direct knowledge of the terms said on Friday.
Under conditions expected to be announced on Saturday, depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.
The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.
Officials had previously spoken of a loss to big depositors of 30 to 40 percent.
Cypriot President Nicos Anastasiades on Friday defended the 10-billion euro ($13 billion) bailout deal agreed with the EU five days ago, saying it had contained the risk of national bankruptcy.
“We have no intention of leaving the euro,” the conservative leader told a conference of civil servants in the capital, Nicosia.
“In no way will we experiment with the future of our country,” he said.
Cypriots, however, are angry at the price attached to the rescue – the winding down of the island’s second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over 100,000 euros.
Under the terms of the deal, the assets of Laiki bank will be transferred to Bank of Cyprus.
At Bank of Cyprus, about 22.5 percent of deposits over 100,000 euros will attract no interest, the source said. The remaining 40 percent will continue to attract interest, but will not be repaid unless the bank does well.
Those with deposits under 100,000 euros will continue to be protected under the state’s deposit guarantee.
Cyprus’s difficulties have sent jitters around the fragile single European currency zone, and led to the imposition of capital controls in Cyprus to prevent a run on banks by worried Cypriots and wealthy foreign depositors.
Banks reopened on Thursday after an almost two-week shutdown as Cyprus negotiated the rescue package. In the end, the reopening was largely quiet, with Cypriots queuing calmly for the 300 euros they were permitted to withdraw daily.
The imposition of capital controls has led economists to warn that a second-class “Cyprus euro” could emerge, with funds trapped on the island less valuable than euros that can be freely spent abroad.
Anastasiades said the restrictions on transactions – unprecedented in the currency bloc since euro coins and banknotes entered circulation in 2002 – would be gradually lifted. He gave no time frame but the central bank said the measures would be reviewed daily.
He hit out at banking authorities in Cyprus and Europe for pouring money into the crippled Laiki.
“How serious were those authorities that permitted the financing of a bankrupt bank to the highest possible amount?” Anastasiades said.
The president, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 war split the island in two, accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”.
European leaders have insisted the raid on big bank deposits in Cyprus is a one-off in their handling of a debt crisis that refuses to be contained.
But policymakers are divided, and the waters were muddied a day after the deal was inked when the Dutch chair of the euro zone’s finance ministers, Jeroen Dijsselbloem, said it could serve as a model for future crises.
“The content of his remarks comes down to an approach which has been on the table for a longer time in Europe,” Knot was quoted as saying by Dutch daily Het Financieele Dagblad. “This approach will be part of the European liquidation policy.”
The Cyprus rescue differs from those in other euro zone countries because bank depositors have had to take losses, although an initial plan to hit small deposits as well as big ones was abandoned and accounts under 100,000 euros were spared.
Warnings of a stampede at Cypriot banks when they reopened on Thursday proved unfounded.
For almost two weeks, Cypriots were on a ration of limited withdrawals from bank cash machines. Even with banks now open, they face a regime of strict restrictions designed to halt a flight of capital from the island.
Some economists say those restrictions will be difficult to lift. Anastasiades said the capital controls would be “gradually eased until we can return to normal”.
The government initially said the controls would stay in place for seven days, but Foreign Minister Ioannis Kasoulides said on Thursday they could last “about a month”.
On Friday, easing a ban on cheque payments, Cypriot authorities said cheques could be used to make payments to government agencies up to a limit of 5,000 euros. Anything more than 5,000 euros would require Central Bank approval.
The bank also issued a directive limiting the cash that can be taken to areas of the island beyond the “control of the Cypriot authorities” – a reference to Turkish-controlled northern Cyprus which considers itself an independent state. Cyprus residents can take 300 euros; non-residents can take 500.
Under the terms of the capital controls, Cypriots and foreigners are allowed to take up to 1,000 euros in cash when they leave the island.
(Additional reporting by Ivana Sekularac and Gilbert Kreijger in Amsterdam; Writing by Matt Robinson; Editing by Giles Elgood)