Cyprus in last-ditch bid to agree bailout (40% haircut)

[BlueStreak]

Source: Guardian

Ian Traynor has more details of the deal that appears to be on the table in Brussels tonight for euro finance ministers to consider

(tweet)

#cyprus 'herman van rompuy has brokered an agreement between cyprus and the troika' - EU source

Read more: http://www.guardian.co.uk/business/2013/mar/24/eurozone-crisis-cyprus-bailout-eurogroup-meeting

---

Reporting that any bank accounts greater than 100,000 Euros will get a 40% haircut.

What is to stop this from being a precedent that our USA banksters will now use against us?

[Poll_Blind]

1. In answer to your last question...maybe FDIC? nt

PB

[dsc]

2. fdic only works up to a certain amount

I think 250k

[Poll_Blind]

6. I checked before I posted. From the page:

The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

We're so far off from the situation Greece is in, though, I can't imagine it would ever come to anything like that.

PB

[BlueStreak]

8. The EU is just making us the rules as they go. And that is EXACTLY what happened here

when Paulsen and Bush devised that plan to give their buddies at Goldman-Sachs a super-tanker full of taxpayer money. Congress had nothing to say about it. They just did it. Most of it happened at the Fed where there is no review. And the rest was just quickly shoved through Congress with no debate at all.

So let's not be naive. It most certainly CAN happen here. And once the EC sets the precedent, there are a lot of banksters here who will find this irresistible.

I sure wouldn't have any money in any Spanish, Irish, or Italian banks right now.

[dixiegrrrrl]

11. FDIC works for BANK losses..not gov't "haircuts"

If the bank freezes or takes your money, FDIC does not cover that.

[BlueStreak]

14. Good point. This is wrapped up as a one time tax

The FDIC wouldn't cover that, any more than they would cover an overdraft fee.

[OrwellwasRight]

16. No, that is exactly what the FDIC insurance works for.

Any type of bank failure, fraud, or freeze. The insurance is against any wrongdoing by the bank.

[leftyohiolib]

25. so who's correct orwellwasRight or dixiegrrrrl

[dkf]

51. dixiegrrrrl is right.

FDIC Insurance does not protect you from being taxed.

[OrwellwasRight]

54. Wrong.

dixiegrrrrl also said:

"If the bank freezes or takes your money, FDIC does not cover that."

That is clearly incorrect, and that is what I was disputing. The FDIC is there fore any wrongdoing by the bank, which is exactly what I said. I never said the FDIC protects you from a tax. You should read the whole post, not just the subject line, especially when the subject line and the post do not reinforce each other, as was the case in post #11.

[dkf]

59. FDIC isn't for wrongdoing...it's just insurance for whatever reason the funds may not be there.

Not all banks who fail were involved in wrongdoing.

And the difference is that Cyprus is a levy/tax, not a bank failure where you only recover a certain amount.

Are you confusing FDIC and SIPC insurance?

[OrwellwasRight]

60. I am not confusing FDIC with anything.

Of course all banks fail due to wrong doing. If no wrong was done (whether simply bad judgment or intentional fraud), the bank would not have failed. FDIC protects against any reason the bank loses or steals your money.

Where did I say it protects against a tax? I said it protects against bank actions. A tax is government action. Try responding to what I say.

[OrwellwasRight]

55. See post #54. nt.

[snot]

36. And if FDIC didn't come through for any reason, you could do what?

Cypriot deposits were also "insured."

[OrwellwasRight]

56. The FDIC offers depositors a Bill of Rights.

Since the creation of the FDIC, no depositor has ever lost a penny of insured savings. Of course the sun may not come up tomorrow either, but that is not really something you can plan for.

FDIC's Depositor Bill of Rights

You have the right to:

Automatic deposit insurance coverage when you open a deposit account at an FDIC-insured bank, with no additional action on your part.

Separate FDIC insurance coverage for deposits held at different FDIC-insured banks.

Confirm that a bank is insured by using the FDIC's Bank Find service (www.fdic.gov/bankfind) or by calling the FDIC toll-free at 1 (877) ASK-FDIC.

FDIC insurance coverage of at least $250,000 for your deposits at an FDIC-insured bank.

Deposit insurance coverage of more than $250,000 at a single bank when deposits are held in different "ownership categories," such as a single, joint and trust accounts.

Confirm that your deposits are within the insurance limits by using EDIE the Estimator at www.FDIC.gov/EDIE or by calling 1-877-ASK-FDIC.

Be informed when a financial product offered by your bank is not covered by FDIC insurance.

Prompt access to your insured deposits in the event your bank fails.

Receive distributions from the receivership if you are an uninsured depositor, as the sale of assets permits.

Sleep well, knowing that since the creation of the FDIC, no depositor has ever lost one penny of insured deposits.

http://www.fdic.gov/deposit/deposits/rights/rights.html

[snot]

71. This did not answer my question.

I hope you're right; but I don't have your confidence in t.p.t.b.

[OrwellwasRight]

81. I think fomenting panic about an FDIC failure is irresponsible and baseless.

It has no history of failing. That is all I have to say to your "question."

I don;t have confidence in tthe powers that be either. I do have confidence in the FDIC.

[cliffordu]

3. God, I hope you're right....

[BlueStreak]

4. Two things

1) FDIC works for the banks, not for us. They are paid by the banks, not by the taxpayers.

2) FDIC only covers accounts up to $250,000. I know that sounds like a lot of money, but there are plenty of "regular" people who have more than that in the bank.

[msongs]

5. yeah, raking in the 0.000000000000001% interest lol nt

[BlueStreak]

7. 21 BILLION in profits last year

https://www.google.com/finance?q=NYSE%3AJPM&fstype=ii&hl=en&ei=vZNPUdg2yreoAZtD

[JDPriestly]

45. Yes. The low interest rates accomplish for our banks what the haircut

will accomplish for the Cypriot Banks.

Both are bail-outs for the banks. Our banks pay savers no interest and charge borrowers a lot of interest. The banks' costs are lower than ever (not counting CEO pay) thanks to automation. They can hire far fewer tellers and typists and accountants than they used to. T
The banks profits are the difference between their low costs, the almost non-existent interest they pay depositors and the high interest rates they charge borrowers.

The banks have lost money because they loaned money to borrowers who could not pay them back. Savers are paying what those who borrowed money and couldn't pay it back did not pay.

I don't blame those who borrowed. I blame the bankers who loaned money carelessly. If you are retired now or in your later years in life -- anything over 40, I'd say, and have saved money during your working years, you are probably paying to help bail out our banks.

[amandabeech]

72. Savers are not only paying for bad loans, but for bad bets (supposedly called investments)

that the banks made in mortgage-backed securities, credit default swaps and other exotic "investment" instruments.

For big banks, the liability for big loans may be exceeded by losses on these "investments" when everything shakes out, except when those banks have sold those "investments" to the Federal Reserve in exchange for US Treasury Notes at a price favorable to the banks.

The Federal Reserve is selling US Treasury securities like there is no tomorrow in the hopes of keeping interest rates down to reflate the housing market and other "investments" that won't kill the bank's balance sheets only so long as interest rates are low.

Essentially, the Federal Reserve is making sure that Citibank and JPMorgan are still afloat by making sure that my elderly Mom only gets 1% on her savings.

[JDPriestly]

79. Right. And then they talk about the chained CPI which is simply

a big word for Social Security cuts.

The problem is that most members of the current crop of retirees and the baby boomers about to retire do not have pensions. If they were lucky enough and well-paid enough to have any savings for retirement, they probably have 401(K)s. And as soon as they get over 65, their broker will look at their paltry account with a relatively small balance and advise them to buy CDs or some other "investment" that pays next to now interest. Any other advice is dangerous.

Younger people are suffering because there are no jobs, and older people are suffering because of the proposed cuts to Social Security (which I think are probably a done deal) and the low interest rates.

The economy is better than it was, but it is still really, really bad, and the banks, the corporations and the media is not being honest about it. You are so right about the Fed protecting the big banks. That is because so many multinationals, oil sheiks and other wealthy cosmopolitans put some of their money in the big banks, and the US government is afraid of offending them.

[jmowreader]

50. Plenty of "regular" people know how to get around that

Show me a regular old person with $1 million in the bank (quite a few of them have it) and I'll show you a regular old person with an account at every bank in town.

[BlueStreak]

52. And please recall that in the heat of the 2008 meltdown there was serious discussion

abut reneging on that provision, or at least closing that loophole in the future.

Ultimately nothing happened because the Fed just gave the banks trillions of dollars of free money to use. That's how it was resolved THAT TIME.

But people need to understand our financial system is EVEN LESS STABLE now than it was in 2008. The banks that did survive have gotten even bigger - too bigger to fair -- and they are playing more casino games than ever. Just look at the "whale" problems that Chase had. That was what just one guy can do. And how many hundreds or thousands of guys are playing these games now?

http://www.huffingtonpost.com/les-leopold/too-big-to-fail_b_2897649.html

Cyprus, "the whale", HSBC drug laundering -- these are all just symptoms of an international racket that is bigger than all of the monetary systems combined. Remember that the AIG problem was that Goldman-Sachs had created derivatives 1000 times greater than the value of any underlying assets, and it was just a game of high stacks "hot potato".

[Psephos]

43. FDIC has assets of $25 billion to cover $9 trillion of deposits.

Those who think the FDIC firewall will protect them when TSHTF aren't doing the math.

[OnyxCollie]

61. It's worse than that.

BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

[OrwellwasRight]

62. Having $1.04 trillion in deposits

is not the same as having $1.04 trillion in insurable deposits. The question is not FDIC assets compared to all bank depostis in the US, it is assets compared to actual risk, as measured by insurable deposits.

[OnyxCollie]

64. Read the article.

Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

[OrwellwasRight]

67. I did read the article.

"Derivatives" are speculative investments, not covered by the FDIC. While the losses in investments in derivatives could make BofA more likely to fail, they do not affect the amount of covered deposits. Nor does the article state or imply that the total amount of deposits at BofA = the amount of FDIC-insured deposits.

I am not defending BofA's behavior. While I agree that the FDIC has a right to object to deals that make an insured bank more likely to fail, and it seems BofA is engaging in risky behavior worthy of criticism, your post implied that the FDIC is likely to fail because of the ratio of total deposits (not insured deposits) compared to the FDIC's reserves. This is an inapt comparison, which is all I was trying to point out. I

f you did not mean to imply that the FDIC is on the brink of failure, I stand corrected.

If you did mean that, i continue to disagree. No one with an insured account up to the FDIC limit has ever lost a penny of his or her insured deposits. I think starting to panic people about the impending doom of the FDIC is inappropriate.

[amandabeech]

73. There is some cushion in that the FDIC may obtain a loan from the Treasury.

The loan is supposed to be paid by upping the FDIC insurance premiums on surviving banks.

I can't recall whether Congress must approve the loan. Perhaps someone more knowledgeable than I can answer that question.

[mbperrin]

9. Depositors should be paid in full. Stockholders and bondholders should take any required haircut,

including 100% if needed.

Why? Because stockholders do that - they assume risk, and when times are good, they prosper. Times are bad, they suffer and even lose their holdings.

Bondholders loaned money at risk - if it doesn't work out, you lose.

Depositors are simply consumers and should not be liable for any of the shenanigans of the first two mentioned groups.

RISK and reward have been turned into reward only for the betters, and punishment administered to the innocent. Wrong on any count.

[AndyTiedye]

12. Stock and Bondholders Will Lose Their Entire Investment Anyway

[OrwellwasRight]

17. No they won't.

Not if the banks are bailed out, which is what is happening here.

[BlueStreak]

31. Some might lose. Some might profit terrifically

In our 2008 "crisis" scam, Goldman-Sachs was able to get Paulsen and Bush to

a) eliminate competitors (those shareholders lost out)

b) take G-S's toxic assets and shove them onto AIG.

So G-S shareholders were golden, but AIG shareholders got screwed.

Follow the money. I bet the German bankers stand to make out just fine in this deal.

[OrwellwasRight]

58. Any bank that is bailed out won't have losses.

AIG shareholders did not get screwed; stock prices went up after the bailout, which is how the USG as able to sell its shares at a profit.

http://finance.fortune.cnn.com/2012/12/11/treasury-aig-sale-3/

[mbperrin]

18. They're losing nothing. They're who the bailout is for.

Huge moral hazard here.

[AndyTiedye]

40. Laiki Bank is Being Liquidated, Shareholders and Bondholders Get Nothing

Instead, the new programme will see Laiki Bank, the country’s second-largest and most troubled financial institution, closed. Its €4.2bn in deposits over €100,000 will be placed in a “bad bank”, meaning they could be wiped out entirely.
Both junior and senior bondholders in Laiki will be wiped out, a first for a eurozone bailout country; in other bailouts, senior bondholders have not faced such losses.

http://www.ft.com/cms/s/0/03c5e484-94ff-11e2-b822-00144feabdc0.html#ixzz2OWZsnwXS

The Bank of Cyprus is being kept alive, but for how long? It stock is trading at 20 cents a share, so stockholders have been just about wiped out already.

[mbperrin]

41. Stockholders should get wiped out if things go bad. That's the meaning of risk and reward.

They took the rewards before, now they need to get punished.

Depositors got no reward, so should not, SHOULD not, be at risk.

So happy I've had nothing to do with banks since 1978.

[AndyTiedye]

44. The Larger Depositors Will End Up Owning Bank of Cyprus

Last edited Tue Mar 26, 2013, 07:25 PM - Edit history (1)

Laiki shareholders get wiped out because the bank is being shut down and liquidated
Depositors under €100,000 get their accounts moved to Bank of Cyprus.
Over that they are put in the "bad bank" and lose a lot of their deposit.
Shareholders are already wiped out, there is no equity.
Bondholders get wiped out as well.

Deposits under €100,000 keep their money,
over that, Bank of Cyprus depositors get equity in Bank of Cyprus.
That won't leave any equity for the original shareholders, obviously.

Update: Bank of Cyprus bondholders get nada too (as it should be).

[Ruby the Liberal]

19. Not in this case.

Bondholders are exempt from losses in this deal. They should have been hit before depositors, but will not be taking ANY cuts.

Keep in mind who the bondholders are in this case - the ECB and EU banks...

Why this is such a dangerous precedent to be set as it reverses the order of liquidation hierarchy.

[leftyohiolib]

26. every contradicting post is being contradicted

[Nye Bevan]

39. Not so (nt)

[OrwellwasRight]

63. LOL. Clever. nt.

[BlueStreak]

13. Absolutely agree. That's why this precedent is HORRIBLE

First, it defines "wealthy" as a bank account of 100,000 Euros. That is not what I consider wealthy.

And let's say the haircut was for accounts over a million euros (more like "wealthy" in my book), it is wrong, wrong, wrong fr the reasons you mention. And it is just plain stupid because it undermines the whole concept of trust which, at the end of the day, is all banks offer to customers.

[OrwellwasRight]

20. Well, I think some might have different definitions of wealthy.

You know, the wealthy always deny that they are so. Nevertheless, I largely agree that stock and bondholders should lose all before any depositors lose anything.

On the other hand, Cypriot banks have so many accounts with more than 100K in Euros for a simple reason: they are a tax haven. Russian mobsters park money there to avoid paying taxes to their own government. I am frankly not opposed to taxing tax dodgers. I think there is no principled stnad in defending tax dodgers.

So, maybe the answer is to let the stock and bondholders lose (yeah, as if the powers that be would let that happen) and then tax the deposits made by non-Cypriots in accounts over 100K Euros.

[BlueStreak]

32. If the EU banksters didn't like tax havens, then they shouldn't have let Cyprus into the EU

Simple as that.

The answer to money launderers and other financial crooks is prosecution. The answer is not to take everybody's money because some of the account holders are bad.

[OrwellwasRight]

57. Using a tax haven is not necessarily the same thing as money laundering.

And it is not necessarily a crime. There may be nothing to prosecute. That doesn't make it morally right to hide money there to avoid taxes. We obviously have different opinions. As I said, I am not opposed to taxing tax dodgers. Simple as that.

And not EVERYBODY's money is being taxed. Just accounts over 100K euros.

[BlueStreak]

66. Are you saying that everybody who had 120,000 euros on account is a tax dodger?

My point is that if the issue was the abuse of these banks , then the right answer is to prosecute the abusers. And if they have not broken any laws, then fix the laws.

The idea of arbitrarily stealing money from people under the guise the "well some of the people were abusing the system" is a horrible precedent. and one that undoubtedly will reach American banksters before long.

Evidently much of the shady money in Cyprus accounts has already been moved to American banks, meaning that it is even more likely that regular people will be the victims. But that is generally how it works. The banksters see it coming and find a safe port before they let the system collapse on the rest of us.

[OrwellwasRight]

68. No, I am saying tax dodgers are tax dodgers.

Foreigners who park their money in Cyprus in order to avoid paying taxes in their home countries are tax dodgers. It is not a difficult concept.

From post #20, in which I respectfully disagreed with you, a favor you cannot apparently return:

You know, the wealthy always deny that they are so. Nevertheless, I largely agree that stock and bondholders should lose all before any depositors lose anything.

On the other hand, Cypriot banks have so many accounts with more than 100K in Euros for a simple reason: they are a tax haven. Russian mobsters park money there to avoid paying taxes to their own government. I am frankly not opposed to taxing tax dodgers. I think there is no principled stnad in defending tax dodgers.

So, maybe the answer is to let the stock and bondholders lose (yeah, as if the powers that be would let that happen) and then tax the deposits made by non-Cypriots in accounts over 100K Euros.

(emphasis added, original spelling not corrected)

Do not put words in my mouth. Read my posts instead. I proposed taxing large deposits by non-Cypriots, i.e., money launderers. Which is not "stealing money from people under the guise the "well some of the people were abusing the system"." If you think that taxing = stealing, you are perhaps in the wrong party. Most Democrats accept the fact that taxes are the price we pay to live in a civilized society (with a nod to Justice Oliver Wendell Holmes).

And to your point, this money has not been moved. There is plenty of tax-dodger money in Cyprus. Cyprus has enforced bank holidays since the crisis started (except for ATMs, which allow people who need their money to live to access it) to prevent the money moving offshore. And the U.S. is not a tax haven, we share information on deposits and depositors with the country of citizneship of depositors so that any taxes owed can be sought by those countries.

[BlueStreak]

69. It is only a "tax" as a charade. It is stealing indiscriminantly.

Look, I don't have any money in Cyprus banks, and I bet you don't either. The difference between the two us is that I view this as a precedent that that banksters all over the world will use now that they see the EC get away with it. If you don't think that is likely, you are welcome to that opinion. But I have read every word of your posts and see nothing in there that gives me confidence that this should be looked upon as a unique circumstance that could only happen one time forever.

I fully expect to see our domestic banksters try variations on this scheme in the next several years.

After all of this dialog, you have still not addressed why you think it is OK for anybody (a central bank or a government) to just come in and take 40% of a person's money out of their account.

[OrwellwasRight]

70. I "have still not addressed why I think it is OK"

You have a really hard time either reading or respecting other people's opinions, or both.

Again, from post #20:

I am frankly not opposed to taxing tax dodgers.

That is why I think it is OK to TAX a tax dodger's bank account. You don't have to agree. I didn't ask you to. But cut the inaccuracies such I telling me I have not addressed why I think it is OK.

Moreover, I love the random:

But I have read every word of your posts and see nothing in there that gives me confidence that this should be looked upon as a unique circumstance that could only happen one time forever.

Of course there isn't. I never addressed that, pretended to address that, or intended to address that. You didn't ask and I didn't answer, and my goal was never to "give you confidence" about anything. So don't go belittling my posts because I did not read your mind or address something that was TOTALLY off the topic of what my posts were about.

[BlueStreak]

74. They aren't "taxing tax dodgers"

The tax dodgers have had an opportunity to move their money. They are stealing (or if you would prefer the word "impounding&quot 40% of the money indiscriminately from anybody who happens to have more than 100,000 euros in their accounts.

Surely the vast majority of account holders hit by this state-sponsored theft are not tax dodgers. Or do you think they are?

I am certainly in favor of going after tax dodgers. Yes, absolutely. Why don't they do that INSTEAD of the plan they actually forced through?

[OrwellwasRight]

80. Then why are you arguing with me?

I am certainly in favor of going after tax dodgers. Yes, absolutely.

Where did I endorse the "plan they actually forced through"?

I have repeated multiple times what my position is, what I support. I'm beginning to think you are just playing games with me because you can't seriously think the things you type, when I have posted, re-posted, and re-posted exactly what I think. I have nothing more to add. Perhaps you should try reading post #20 one more time. I am sure it will answer your questions.

Let me also repeat one thing: taxing is not stealing.

[BlueStreak]

83. My apologies. I thought you were arguing that this was a good policy.

Taxing is not NECESSARILY stealing, but it is in this particular case. This is a one-time move where 40% is taken out of everybody's bank accounts and it is called a tax to make it sound halfway legit.

[muriel_volestrangler]

15. While the bondholders should suffer before depositors, that may not help much

With Cyprus, the euro zone once again sidestepped the question. Officials involved in the rescue talks say that “bailing in” senior bondholders wouldn’t have made sense given that, by the end of September, Laiki and Bank of Cyprus had only some €184 million of senior bonds between them—peanuts next to the €10 billion the two banks need in new capital.

http://blogs.wsj.com/brussels/2013/03/18/senior-bonds-last-ones-standing/

I'm not sure what the plan is for stock in the banks, but the Bank of Cyprus share price was down about 60% on the year, before trading was suspended. I think the assumption is that it's already pretty worthless - which is why this plan, which involves giving the depositors stock in return for taking some of their money, is so unpopular with them.

[dipsydoodle]

24. Euro zone finance ministers have approved the EU-IMF plan to resolve cypriot banks - EU official

http://www.reuters.com/article/2013/03/25/eurozone-cyprus-draft-deal-idUSL5N0CH00H20130325

btw one of the Laiki a/cs is a Cypriot pension fund with €700 million in it. If it was a 40% haircut they might not be amused.

EU Official: Eurozone ministers approve EU/IMF plan
http://www.itv.com/news/update/2013-03-25/eu-official-eurozone-ministers-approve-eu-imf-plan/

Goodnight

[daleo]

30. The symbolism would have still had value

Showing that risk-takers actually took a loss, as is implied by the term risk-taker, would have had substantial psychological impact. Bailing them out at the expense of depositors sends a signal that is contrary to economic logic, if one is serious about the notion of risk-taking.

[muriel_volestrangler]

10. The 40% is for just the Bank of Cyprus

which is one of the 2 that are on the brink of failure. An uncontrolled failure could mean the loss of all of the deposits over €100,000.

[mbperrin]

21. THEN the lynchings should begin. This "softer" landing really only benefits those in charge.

The government needs to make sure depositors are covered 100% - they have made no decisions to cause these bank failures.

Once again, money triumphs morals.

[muriel_volestrangler]

23. Lynchings don't make money

So what you're saying is that the Cypriot taxpayers should reimburse, in full, the hundreds of thousands, or millions, of euros that the foreign investors have deposited in these 2 banks? It's the taxpayers' fault that the banks failed, in your view?

[mbperrin]

37. Lynchings keep crooks from doing it again.

The taxpayers do not provide one dime of the FDIC government agency's budget. If there is no program like it in Cyprus, that's the end of it. The people who made the banks fail are the managers, hired by the stockholders. That's who needs to go out and over and be lynched, if necessary, to prevent a repeat. The bondholders just need to be pauperized. If there's no government program like FDIC in place, well, lesson learned in trust.

I don't want the taxpayers to spend a cent, period.

I want to protect depositors if possible.

Management, stockholders, and bondholders to the wolves.

I hope I'm clear this time, because I usually find myself in agreement with your posts.

[Psephos]

42. Your posts in this thread have been damn good. n/t

[muriel_volestrangler]

47. There isn't enough in the Cypriot equivalent of the FDIC to pay back all deposits

First of all, you said a moment ago you wanted all deposits paid back by the government - which means the taxpayers.

Cyprus has a deposit insurance scheme for the first €100,000. In this deal, those deposits are protected. But, even if there is enough in the scheme to cover all deposits in these 2 banks up to €100,000, it was not meant to be used for more than that - and shouldn't be used for more than that, because it needs to be able to cover other deposits in other banks, that are still viable. I agree with you that stockholders should lose all the money they put in, and bondholders as well - but (see the figure given in reply #15) that doesn't look like it would be anywhere near enough.

If you now say you don't want the taxpayers to pay anything, then the next people in line would seem to be the depositors of more than the guaranteed €100,000. Which is what this deal proposes.

'Lynchings' (by which I presume you mean jail sentences) require some evidence of illegality. If they can find that, the cases should go ahead. But it is possible for banks to fail without crimes being committed.

[cstanleytech]

22. "What is to stop this from being a precedent that our USA banksters will now use against us?"

I dont know about you but if a haircut of over $100,000 were to happen here I know it wont impact me as I barely have enough in the banks to pay the bills week to week.

[bossy22]

27. completely different scenario

the U.S. government still controls the currency. No one (except ourselves) can force us into such a scenario

"Banksters" cannot hold the U.S. hostage like they do greece and cyprus. We have the "printing press" for the dollar.

[cstanleytech]

28. And I am willing to bet the republicans are probably trying to outsource that to or

if not they will try to eventually.

[bossy22]

33. not outsource it, but severely self restrict it

they want to pass laws pretty much limiting our ability to deal with financial crises by use of the Federal Reserve. Essentially it would be a self inflicted wound

[BlueStreak]

34. Now let me understand this

Are you aware that one of our houses of the legislature has already voted to shut down our Medicare system. And they have voted to turn over our social security system to profiteers.

Why should any of us have the slightest bit of confidence that next year, people like Ryan will not show up with "crisis legislation" to simply impound what savings we might still have?

I don't see how anybody who has paid the slightest bit of attention to American politics over the past decade could still say "Oh , that wouldn't happen here. Our financial system is too trustworthy and transparent for anything like that to happen here."

Frankly I find that position astonishing.

Have you read "Shock doctrine"?

[bossy22]

35. it has nothing to do with transparency of our system

it has to do with the fact we have a decentralized monetary system- where congress does not have direct control of the monetary supply. Unless the republicans manage to get rid of the fed (they are trying but they just don't have the votes) our last line of defense remains intact.

[BlueStreak]

38. No, but this is a TAX, and Congress can do that

The modality for ripping off the public may not be exactly the same as the EC is using. The concept of just being able to go in and grab deposits is a terrible precedent. And to think that this could not happen here -- after everything we have seen -- just strikes me as naive.

[Bosonic]

29. Live webcast of Eurogroup press conf.

http://www.zerohedge.com/news/2013-03-24/eurogroup-press-conference-live-webcast

[quadrature]

46. terrible result

Cyprus should leave the Euro,
Recent events were an (lost) opportunity
to push Cyprus out.

Cyprus is currently dependent on Banking,
for a large part of its economy.
but not for long.

Russian mob money will dry up.
So will the banks.
there will be another crisis, sooner or later.

[BlueStreak]

48. At some point, everybody would probaby be better off killing the Euro

This whole concept was doomed from the start. If you thing teabaggers in Red states are bad, they are downright neighborly compared to the various European countries. But there is a strong parallel. In both cases, you have the renegades being the ones who are essentially on the dole -- with the lower incomes, greater poverty, lower education levels, overall lack of economic drive.

The US would have been far better off letting the Southern welfare states form their own country. The EC would have been far better off not including the welfare countries in their common currency. It was going to blow up. The only question was when. And that still is the only real question. Meanwhile this drip-drip-drip of Euro problems is holding back the American recovery.

At least in the case of the USA, we had a good reason for not allowing the welfare states to secede: the end of slavery. There was no similar compelling moral reason for form this ridiculous Euro thing.

I still wouldn't mind seeing the USA cleave off the welfare states and shed that burden forever, but that isn't going to happen. It is far more likely that the Euro will end up dropping their welfare states: Italy, Greece, Spain, Portugal etc. because there really isn't much that ties them together other than the currency. And the currency linkage is the biggest problem.

Ironically, before they went to a common currency, they had formed the "European Community" structure that actually was very beneficial in enabling commerce and unifying regulations throughout the region. If they would have stopped there, that would have probably been a good thing.

[amandabeech]

75. I agree with you on the Euro.

It was supposed to be one size fits all.

That concept seems to be working with currency the same way it works with clothing.

One size generally doesn't fit anyone well.

[BlueStreak]

77. The concept worked until they realized "too big to fail" dominates

It seems to me, there was an underlying assumption that if the weakest countries mismanaged their economy to the point of endangering other countries, then the EC could just cut them off. In other words, they believed that the EC could enforce some standards in terms of total debt and ongoing deficits. In the end, they really cannot, and that has caused this painful period of weekly crises for the past 18 months.

The parallels with Elizabeth Warren's "too big to fail" are very strong.

We know how to fix that in the US. Bring back Glass-Steagel and make it clear that there won't be any bailouts for any of the casino banks. They are on their own. If they lost, they go under. But we will protect the lending banks. And if any of those are too big to protect, then we break them up. After a division to comply with the return of Glass-Steagal, there would probably only be 2 or 3 banks that would need to be split further, and that is very manageable. Simply divide them on geographic lines. It isn't complicated. It just takes political backbone.

But I have no idea how they can unwind the Euro thing.

[amandabeech]

78. I think that the Euro was helped by the fact that it was born during good times.

When the world economy, including Europe's, started to fall apart in 2008, the Euro started to falter.

Many relationships do well during good times, but fall apart in bad.

Somehow, the Euro will either totally unwind or will end up being used only by a handful of countries. How that will happen, I don't know, but I think that it will happen eventually.

I was and continue to be opposed to financial deregulation. I have read that Dodd Frank, which was weak anyway, is being dismantled by very weak regulations made under heavy, heavy financial institution lobbying. The financial crisis may not be over. I hope Sen. Warren keeps on the case, because she's needed now and she will continue to be needed in the foreseeable future.

[BlueStreak]

82. I agree about good times / bad times, but the fractures were there before 2008

Certainly it is all out in the open now.

And really the same thing can be said about any of these deregulation efforts. During the first few years when the vultures move is, there is a great flurry of economic activity. But once the meat is taken from the bones, we are left with a bloody mess. Sometimes that cycle takes only a couple of years. It took 10 years to blow up in the banking sector It was a slow steady decline in the airline industry over 30 years. after deregulation. How is all that consumer choice working out now that we have essentially 4 too-big-to-fail airlines?

And the telecomm business, we have basically one company now. Technically I suppose there are still 3 brands out there, but they all have exactly the same price-fixed prices. 30 years later, we have no more competition than we had when it was all "ma bell" but they got rid of the regulation, so the oligopoly is free to do anything now.

[muriel_volestrangler]

49. Some details, and comment

The official statement:

Following the presentation by the Cyprus authorities of their policy plans, which were broadly welcomed by the Eurogroup, the following was agreed:

1. Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.

2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.

3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 bn Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions.

4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.

5. BoC will be recapitalised through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.

6. The conversion will be such that a capital ratio of 9 % is secured by the end of the programme.

7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.

8. The programme money (up to 10bn Euros) will not be used to recapitalise Laiki and Bank of Cyprus.

http://www.eurozone.europa.eu/newsroom/news/2013/03/eg-statement-cyprus-25-03-13/

1) In case you didn’t get the memo the first time, this still isn’t about spanking money-launderers.
...
2) It’s a depositor bail-in — for two specific banks, one of which is in full resolution.
...
Laiki’s uninsured deposits are sent to the bad bank, where their ultimate haircut will depend on the recovery of the assets sold from its balance sheet. Whenever those sales conclude. The process should be pretty uncontroversial, surely (it’s how bad banks work) but the hit is clearly expected to be biblical if the €4.2bn figure applies. I wouldn’t hold my breath for a Reserve Primary-style 99 per cent recovery, would you?

What happens to BoC’s uninsured deposits is more interesting. Again, freezing the deposits might not set a massive precedent but this all being done to achieve recapitalisation (through a swap into equity) rather than through a full wind-down process. It happens in emerging markets (sometimes) but this is new for the eurozone. Charlemagne says the haircut could be 35 per cent. Would large depositors have preferred taking a double-digit tax (a cost of doing business?) over being frozen for an unspecified period of time? Something to ask your Cypriot MP last Monday.
...
3) It’s also a senior bank bond bail-in.

http://ftalphaville.ft.com/2013/03/25/1437052/scratch-one-stupid-idea/

There's also comment there about the Emergency Liquidity Assistance, which is European Central Bank money lent to banks to keep them alive. Laiki had €9 billion of it, which is a debt now transferred to Bank of Cyprus. The question is whether the ECB realistically still thinks this will be paid back to it sometime, or whether it will end up losing it at some stage.

On edit: actually, ELA is a debt to the central bank of Cyprus, not the ECB:

ELA loans sit on the balance sheet of the national central bank and therefore that of the Eurosystem of Central Banks (the euro zone's 17 national central banks plus the ECB), but not directly on the ECB's own balance sheet.

It does appear in the ECB's daily calculations of liquidity as part of the "autonomous factors" header.

Governments are ultimately responsible for any losses from ELA given by their central banks, as they underwrite them.

http://uk.reuters.com/article/2013/03/21/uk-factbox-ecbs-emergency-idUKBRE92K0DT20130321

[mainer]

53. Repercussions: new spike in real estate prices?

If you can't trust a bank as the safe place to park your money, where are you going to go? Those who save and save all their lives are going to be looking for safer places to invest their retirement funds. What's sad is that banks have always seemed like the most secure places, even though they give you the puniest returns. For those of us who consider the stock market as a gamble, banks have seemed like boring but absolutely reliable institutions. Now we can't even count on that.

So what's left? Real estate.

[amandabeech]

76. Perhaps, but real estate where?

In Europe?

In many parts of Europe, real estate took a real hit after 2008. For example, there are unfinished, unoccupied developments in many parts of Spain and Ireland just like there are in Florida.

Prices in some places here are going up because big money is investing in rental property and in some cases because people with money from other countries view the US as a safe haven.

Recently, I've read that the Chinese are buying individual homes in California.

The NYT had a story recently that the Russian mob is putting its money into real estate in NYC and environs and in Miami. It's not just pricey homes, but commercial and mutil-family investments and construction.

I have doubts about Miami, but NYC is probably safe unless and until the banks and investment companies there reach the end of the bailout, which may come if the Fed changes its chairman or quantitative easing actually ends up causing inflation above 3% here.

[BlueStreak]

65. Here's what I'm talking about: A "Game changer" is not a good thing

http://www.foxbusiness.com/news/2013/03/26/cyprus-rescue-marks-game-changer-for-europe-banks/

Just another case of Shock Doctrine. Whenever there is a "game changer", the average person gets hosed.