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Everyone is going to have to cut me a little slack on the
eve of the celebration of American independence. No, this isn't about that
video that came out a few days ago that demonstrated
exactly how ignorant Americans are about the
significance of tomorrow or how the accomplishment that day has been eroded
over the past 2+ centuries by those eager to 're-create' America in their own
twisted image. This one is a companion piece to a series of 'Two Cents'
articles that have been released over the past few years relating to the
bail-in. I know, I know. He's at it again. The Pessimist of Pennsylvania is
going to go on another rant about those rotten banks and how they're
conspiring to rip everyone off.
A few years ago, it was a little island called Cyprus. A
weekend crisis followed by a bank holiday followed by the unprecedented move
of swiping bank deposits to re-capitalize banks. The action was dubbed a
'bail-in' since instead of raiding taxpayers (I guess no taxpayers have bank
accounts), the banks would look to the inside and steal from their customers
to keep this whole sham afloat. The take-home from Cyprus was simple: the
people were not given any chance to take action to protect their deposits.
The crisis boiled over on a weekend when banks were normally closed anyway,
the ATMs ran dry, and by Monday a 'holiday' was announced. By the time
depositors could get access to their accounts again, the rip off had taken
place. Granted, that particular action only targeted accounts greater than
100,000 Euros, but it's the principle. Keep that in mind for the future.
In 2011, the Bank of England, in conjunction with the
FDIC here in America, drafted a policy paper entitled "Resolving Globally Active, Systemically Important,
Financial Institutions
". Concomitant to this, the Bank for
International Settlements was preparing its own draft entitled "Report and Recommendations of the Cross Border
Bank Resolution Group". The upshot
as I and many others screamed about at the time was to steal bank deposits to
cover bank losses in a financial crisis. People hooted and hollered and said
'it will never happen in America'. To which we responded "It already
has". Eyes immediately glazed over and the focus was lost. That was
honestly about as far as I got with most people on this whole topic. Precious
few were even willing to listen for the 15 minutes necessary to explain the
situation regarding Sentinel, Peregrine Financial, and MFGlobal, as well as
the legal precedents set in the Sentinel case. I'm not going to delve into
the particulars here because that work has already been done. Links are
provided below for those who are not yet up to speed and wish to do so.
The bottom line as I sit here on the eve of American
independence is that the bail-in is likely to strike again, this time in a
much bigger way, and on an order of magnitude much higher than in Cyprus. To
be honest as well as accurate, it actually hasn't happened yet, but is being
discussed as a plan of action should Greek banks continue to be festooned in
crisis. So maybe I'll be accused of jumping the gun, but I'm taking a
different angle here so bear with me.
In Cyprus, the 'haircut' as it was called was applied to
all accounts that were greater than 100,000 Euros. According to the Financial
Times, the plan being discussed in Greece is to steal 30% (No, I don't like
the term haircut; this is stealing) of all accounts that are greater than a
mere 8,000 Euros. It doesn't take any kind of rocket scientist to figure out
that if this actually transpires in Greece that the scope of impact is going
to be far greater than it was in Cyprus. Don't take that as a justification
to rip off people who have a lot of money in the bank. Cyprus was a crime.
The criminals walked between the rain drops and got away scot free. Their
illegal actions were deemed legal by the banking community. This alone should
tell you a lot about who makes the laws when it comes to money and the
movement and possession thereof. If the Greek banks go through with their own
bail-in, they will be criminals as well, however, the policymakers of the
world have said that stealing is ok. No harm, no foul, right?
Those same policymakers have also decided that this new
bail-in mantra applies to US banks and their depositors. We know the FDIC is
grossly underfunded to handle anything but a miniature crisis. The FDIC is
like a car insurance company. It plans for a certain amount of accidents on
any given day, but what happens if its clients develop narcolepsy and the
number of car crashes goes up dramatically? The auto insurer is in big
trouble. And such is the case with the FDIC. If you want to bet your kids'
future on that ridiculous sticker they plaster all over the banks about a
$250,000 'guarantee' then be my guest. You have that freedom as an American.
Remember, you also bear the responsibility to deal with the consequences of
your actions. You are not Bank of America, Goldman, or JP Morgan. You will
not be bailed out. Any lifeline you get will have interest upon interest and
debt servitude attached to it.
I'll make this short and sweet. I want everyone who reads
this article to take 10 minutes after you read this, and perhaps some of the
companion pieces, to think about whether or not your bank might have
discussed the bail-in as an action plan should its exposure to the Eurozone
crisis be too much. Did your bank have to be bailed out in 2008? Did it take
TARP/TSLF money? Do you even know? You can find out easily enough. Was your bank implicated in the rigging of
LIBOR? Is it engaging in the same risky
behaviors today that got it in trouble in the past? If the answer to any of
these questions is 'yes', then I'd ask only that you spend some time and
seriously consider why you are continuing your relationship with an
institution that takes risks, seeks taxpayer money when things go wrong and
it goes kerplunk, and now has the legal authority to swipe your hard-earned
savings if and when there is a repeat of 2008 or a situation similar to it.
Below are the links to everything related to the bail-in
that I've compiled. Again, in conclusion, I stress that as of the writing of
this column, there has NOT been a bail-in in Greece. It has, however, been
made public as a pathway should the crisis continue. That, along with the
proposal of hitting accounts with such a low balance, makes it worthy of
mention. Don't get caught in the media and establishment's mental trap that
just because the fireworks are flying here that your savings aren't in the
crosshairs of the same people who are, at this very hour, plotting across the
Atlantic.
Series of articles starting with the Cyprus
bail-in and examination of FDIC/BOE and BIS documents
Retirement Accounts Next (with Graham Mehl) -
6/28/2013
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