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Money grab from depositors for bail-outs is long-planned, and it's not just for Cyprus

(For updates on Cyprus see this post and this live blog). Recall that the Cyprus crisis began when Cypriots revolted against an EU-imposed bank bailout that would have reached into the accounts of ordinary depositors and grabbed ~6% of whatever was there -- over a long weekend! The EU, and subsequent media reporting, defined the money grab as a "one off," one-time thing, but in fact the policy has been in the works for some time. The redoubtable Ellen Brown:

The deal pushed by the “troika” -- the EU, ECB and IMF -- has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.

In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.

The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:

ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors...

The spectrum of “creditors” is defined to include depositors:

At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.

Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case.

Well, I'm certainly surprised. My bank certainly goes out of its way to create that impression.

Please, can't we have a Post Office bank where I can just, ya know, put my money without worrying it's going to be stolen?

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danps's picture
Submitted by danps on

A Post Office bank sounds good in theory, but there would be some real devils in the details. For instance, what if you have money in one and you owe money to the IRS? Could they just seize it? Or use it for some other purpose? Imagine how much easier a Cyprus-style grab would be if there was one stop shopping for a huge portion of the population.

Surely the government would never launch such a program with an ironclad promise never to do so, then go back on its word later - right?

Rainbow Girl's picture
Submitted by Rainbow Girl on

"The authors wrote that the primary objectives of OBR are to: ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors..."

Basel talks -- 2010 - 2011. Note, note, note.

Just yesterday account holders with Chase found that online their accounts registered balances of "zero." Chase apologized describing this as an "internal" problem -- just have to "tweak" the computer "glitch."

Yeah, right. Testing, testing, testing.

nihil obstet's picture
Submitted by nihil obstet on

As I've commented elsewhere, this has been going on in the U.S. for years. Only the corporations taking money out haven’t been banks, they’re manufacturers. And the people whose money has been confiscated aren’t called depositors, they’re called workers. The deferred compensation called pensions have been redefined as “legacy costs” for the poor beleaguered corporations suffering from the demands of greedy union members. The objections to this kind of thing have been pretty weak bleating. But what is a bank deposit except a “legacy cost” for the banks? I'm glad everybody is going ballistic about taking the depositors’ money, but there is an element of supporting the privileges of ownership over the rights of labor that we should remember.

Rainbow Girl's picture
Submitted by Rainbow Girl on

... your pensions,

Then they came for the unions

Then they came for your salaries,

Then they came for your jobs,

Then they came for your savings accounts,

Then they came for your home,

Then they came for your checking account cash ...

[Kleptocracy Thesaurus: Consumer Debt = Quantitative Easing = Corzining = Vaporizing = Do A Cyprus]

Submitted by lambert on

Nothing left in the pensions, so they go after the savings accounts. I suppose there will be a "mandate" to save at some point....

Rainbow Girl's picture
Submitted by Rainbow Girl on

with 401(k) legislation allowing employer automatic enrollment into 401(k) programs (basically creating an *opt-out* system), BECAUSE NOT ENOUGH SAVINGS, where "savings" = stream of income that can be looted via fees etc by money managers, brokers, mutual fund companies, and the various banks that thanks to Rudin can now broker, fund, etc.