Dutch EU chairman announces that taking from depositors is template for future crises

[ATCclears]

Cyprus bail-out: savers will be raided to save euro in future crises, says eurozone chief - Telegraph

The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.

"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? What can you do to recapitalise yourself?'," he said.

"If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders."



Yup, you read that correctly. Cyprus is simply the first country where theft has been applied.

Peter

Read More

 

[erudne]

Impoverishment, Enslavement, Genocide

 

[Father of four]

It sucks.

 

[Silver Fox]

It's kind of like we all knew this was going to happen, but it really sucks watching happen it.

Oh well lets get this party started.

SF-

 

[erudne]

Top-Down
Bottom-Up
Side-To-Side
Inside-Out
Sharia-Law

 

[kev350]

Hmm wonder
If there will be a decline in deposits in the banks.

Galaxy S 3

 

[Botte Hork]

The EU has had their eyes on the considerable pension funds in Holland as well.

 

[drew]

Thinking there will be a bank run in a few other countries soon unless they lock accounts quickly.

Makes me want to trade some more cash for silver, gold, or lead.

 

[erudne]

Eurozone Still Making Up Rules on the Fly
Global financial markets were spooked on Thursday by comments from the leader of the Eurogroup that suggested the chaotic and controversial bailout of Cyprus could serve as a prototype for future rescues in the eurozone.

While the comments were later walked back, the violent market reaction underscores how nearly four years after the eurozone sovereign debt crisis first began in Greece, European policymakers are still making up the rules as they go, much to the dismay of investors.

"They're trying to make the reform little bit by little bit. The risk there is that these incremental changes get overtaken by events," said Jack Goldstone, senior fellow at George Mason University. "There's always something that creeps up in the absence of a comprehensive agreement."

The tiny country of Cyprus seemed to creep up on Europe, going from a little-known banking center to a front-page story that captivated investors around the world almost overnight.


"When someone screams fire, you don't want to shut the exit."


- Axel Merk of Merk Investments





Cyprus created an uproar by initially giving in to pressure from creditors to raise 5.8 billion euros by tapping insured and uninsured deposits alike. Eventually Cypriot lawmakers rejected the measure and leaders in Europe insisted such a deposit levy wouldn't be imposed elsewhere because Cyprus is a special case.

Template or Not?

After Cyprus secured a 10 billion euro bailout over the weekend, Jeroen Dijsselbloem, the head of the region's finance ministers, seemed to suggest to Reuters on Monday that the island country's rescue could serve as a template for future deals, even by taxing depositors.

"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? What can you do to recapitalize yourself?'" he told Reuters. "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."

Global markets tumbled on the headlines, highlighted by a 1% decline for the euro against the U.S. dollar and a 2.50% selloff for the Italian benchmark index.

Italian banks took the brunt of the damage, with shares of UBI Banca and UniCredit being halted. Rome-based UniCredit closed down 5.81%, while Intesa Sanpaolo tumbled 6.21%.

"You don't say we just had this wonderfully botched experience but we should use that as a template for the rest of Europe. I think that's rather irresponsible," Axel Merk, president and CIO of Merk Investments, told FOX Business. "When someone screams fire, you don't want to shut the exit."

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said the comments "took away any solid ground to stand on," but warned the markets may be reading too much into the comments.

Dijsselbloem later walked back the comments, saying bailouts are "tailor-made" to individual countries and no "models or templates are used." He said Cyprus is a "specific case with exceptional challenges which required the bail-in measures."



Writing the Rules Mid-Crisis

All of this highlights how, unlike in the U.S., which just went through its worst banking crisis since the Great Depression, the playbook on resolving and recapitalizing eurozone banks remains largely unwritten and subject to change. The currency bloc still lacks a formal banking union.

"They're having to make the rules as the crises develop," said Jan Randolph, director of sovereign risk at IHS Global Insight. "In America you've got well tested and clear bankruptcy legislation. It's all been well documented. Everyone knows who's in the queue. That's less defined in European banking."

New rules on winding down banks were enacted by the 2010 Dodd-Frank reform law, parts of which are still being implemented by regulators.

"Whenever you have a banking crisis, the banking rules get rewritten. It's pretty normal that a crisis leads to changes," said Goldstone.

However, he noted that what is striking in Europe is how policymakers are not trying to revise their rules all at once, choosing instead to make reforms step by step.

Protecting Creditor Taxpayers

So what lessons can investors take away from the Cyprus bailout and confusing fallout?

"I think Europe's institutional arrangement has evolved," said Chandler. "In future bank bailouts, there will be a broader involvement of stakeholders."

Randolph said it now appears that money from the ESM bailout fund can only be accessed after the following groups take hits: bank shareholders, junior and senior unsecured bondholders, senior secured bondholders and depositors over 100,000 euros.

The last two groups mark a departure for the eurozone and are "now placed clearly ahead of the sovereign," said Randolph. "What they're doing is building layers of protection to the Dutch and German taxpayers. The ESM is being kept well back."

It's important to note that at this stage of the crisis there aren't many other countries which haven't already been bailed out that would even fit within the Cyprus template. That's because few countries other than perhaps Luxembourg have a banking system relative to gross domestic product that is on par with the oversized Cypriot system.

Still, the latest bailout playbook seems to put private capital firmly ahead government funds in the event of a solvency issue, meaning investors and depositors may pay closer attention to banks' health.

"While this is good for moral hazard, it may mean ultimately that [eurozone] banks will have to more clearly demonstrate than before" that they "have more than enough capital," said Randolph.

As this process runs its course, Goldstone said he's worried about "a run as large depositors start to pull money out of banks that look a little shaky."

 

[MountainBear]

I have no savings in the traditional form. I have steel, walnut, kevlar, brass, lead, and even a bit of silver. At any given time, these items can be sold or traded for what I want or need. I don't trust banks. Never have, never will.

 

[ATCclears]

Can It Happen Here? | RealClearPolitics

The decision of the government in Cyprus to simply take money out of people's bank accounts there sent shock waves around the world. People far removed from that small island nation had to wonder: "Can this happen here?"

The economic repercussions of having people feel that their money is not safe in banks can be catastrophic. Banks are not just warehouses where money can be stored. They are crucial institutions for gathering individually modest amounts of money from millions of people and transferring that money to strangers whom those people would not directly entrust it to.

Multi-billion dollar corporations, whose economies of scale can bring down the prices of goods and services -- thereby raising our standard of living -- are seldom financed by a few billionaires.

Far more often they are financed by millions of people, who have neither the specific knowledge nor the economic expertise to risk their savings by investing directly in those enterprises. Banks are crucial intermediaries, which provide the financial expertise without which these transfers of money are too risky.

There are poor nations with rich natural resources, which are not developed because they lack either the sophisticated financial institutions necessary to make these key transfers of money or because their legal or political systems are too unreliable for people to put their money into these financial intermediaries.

Whether in Cyprus or in other countries, politicians tend to think in short run terms, if only because elections are held in the short run. Therefore, there is always a temptation to do reckless and short-sighted things to get over some current problem, even if that creates far worse problems in the long run.

Seizing money that people put in the bank would be a classic example of such short-sighted policies.
After thousands of American banks failed during the Great Depression of the 1930s, there were people who would never put their money in a bank again, even after the Federal Deposit Insurance Corporation was created, to have the federal government guarantee individual bank accounts when the bank itself failed.

For years after the Great Depression, stories appeared in the press from time to time about some older person who died and was found to have substantial sums of money stored under a mattress or in some other hiding place, because they never trusted banks again.

After going back and forth, the government of Cyprus ultimately decided, under international pressure, to go ahead with its plan to raid people's bank accounts. But could similar policies be imposed in other countries, including the United States?

One of the big differences between the United States and Cyprus is that the U.S. government can simply print more money to get out of a financial crisis. But Cyprus cannot print more euros, which are controlled by international institutions.

Does that mean that Americans' money is safe in banks? Yes and no.

The U.S. government is very unlikely to just seize money wholesale from people's bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe?

No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever the politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed.

That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about "quantitative easing," what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do -- and has been doing in recent years, to the tune of tens of billions of dollars a month.

When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.

This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?

 

[knuckle Head]

From each according to his abilities, to each according to his needs.B]

Karl Marx

Read more at From each according to his abilities, to each according to his needs. - Karl Marx at BrainyQuote

 

[erudne]

So now one of the big wheels in the ECB has stated that taking 40% is not out of the question, which of course relates to also stating that each incident will require it's own solution, I.E. No Rule Of Law. Cyprus is now a 3rd world nation w/ a declining economy because not all those bank accounts were Mob accounts but business accounts, payrolls, operating costs, supply costs, utility costs were paid out of those accounts.
No Payroll , no jobs, no food, no shelter
Cyprus is toast
Europe is Toast
Russia and Islam Rise
Obama's New Caliphate will seize the Mediterranean just like a certain banned member predicted less than 2 years ago.
Thed New Caliphate will not be run by Turkey nor Iran but by The Muslim Brotherhood out of Cario and the WH. This is why Obama must destroy Syria, this is why the Bengazie Murders happened and the survivors are hidden away at Walter Reed.
Iran, as the only Persian nation will resist the Arabs, Obama will destroy it, starting a regional war.

 

[PolishedBrass]

Pretty Kewl you know what you know.

Not too many know of the Caliphate and plans.

So now one of the big wheels in the ECB has stated that taking 40% is not out of the question, which of course relates to also stating that each incident will require it's own solution, I.E. No Rule Of Law. Cyprus is now a 3rd world nation w/ a declining economy because not all those bank accounts were Mob accounts but business accounts, payrolls, operating costs, supply costs, utility costs were paid out of those accounts.
No Payroll , no jobs, no food, no shelter
Cyprus is toast
Europe is Toast
Russia and Islam Rise
Obama's New Caliphate will seize the Mediterranean just like a certain banned member predicted less than 2 years ago.
Thed New Caliphate will not be run by Turkey nor Iran but by The Muslim Brotherhood out of Cario and the WH. This is why Obama must destroy Syria, this is why the Bengazie Murders happened and the survivors are hidden away at Walter Reed.
Iran, as the only Persian nation will resist the Arabs, Obama will destroy it, starting a regional war.

 

[knuckle Head]

A lot of people do not like Glenn beck, but he has been talking about the caliphate for a couple of years now

 

[ATCclears]

Mish's Global Economic Trend Analysis: EU Pushes Bail-In Regulations on All Deposits Above ?100,000; Run on Banks Coming Up?

 

[erudne]

Apparently the Russians pulled out most of their dirty money before the crisis
China is now buying propertys in Cyprus, with American dollars
Draconian money controls are now in place in Cyprus, the population is in a state of virtual slavery

 

[PolishedBrass]

I really like Glenn Beck ... almost a as much as Alec Jones.
Had not watched most of his stuff since I had already knew most years ago.

I sure hope somebody makes a Liberty Media Archive of all the greats ...
because IF we are overrun ... it is possible that nobody will ever know what Liberty and Freedom were.
The ONLY reason that first amendment blessing is still "hanging on" is because of the second amendment.

A lot of people do like Glenn beck, but he has been talking about the caliphate for a couple of years now

 

[Bazooka Joe]

While the politics behind what has happened in Cyprus sucked, it actually ended up the way it should have for bad banks. That is, the taxpayer bails out the insured deposits, the bank closes, and all of the rest of the investors lose their investment (unless there are any assets left after bankruptcy). What sucks for Cyprus now is that they have Euros that aren't really Euros because of capital controls. It's like if a bank in Illinois was having troubles, and everyone in Illinois is told, your money is fine, you just can't use it outside of Illinois or move it to a bank in another state. If your dollars don't work outside of Illinois, they aren't really dollars any more.

 

[knuckle Head]

I was wander, how many of the people that were involved in the negotiations had $$$$ in these banks that magically got moved for some odd reason prior to or during the negotiations and magically was not affected by all of this. I can't wait for it to come how just two weeks so and so's money insured or moved and got saved and oh yeah they were one of the people that came up with this method of theft.