Americans warned bank ‘bail-ins’ coming

Experts say institutions will grab deposits without warning

WASHINGTON – With the United States facing a $17 trillion debt and an acidic debate in Washington over raising that debt limit on top of a potential government shutdown, Congress could mimic recent European action to let banks initiate a “bail-in” to blunt future failures, experts say.

Previously the federal government has taken taxes from consumers, or borrowed the money, to hand out to troubled banks. This could be a little different, and could allow banks to reach directly into consumers’ bank accounts for their cash.

 Authority to allow bank “bail-ins” would be in lieu of approving any future taxpayer bailouts of banks that would be in dire need of recapitalization in order to survive.

Some financial experts contend that banks already have the legal authority to confiscate depositors’ money without warning, and at their discretion.

Continue reading

Nigel Farage On “Wholesale, Violent Revolution” In Europe

zerohedge.com
May 1, 2013

In a little under two minutes, Nigel Farage sums up the utter farce that “the religion” that Europe has become. He explains, his fear is that what will break up the Euro, “is not the economics of it, but wholesale, violent revolution,” in the Mediterranean, and that is “all so unnecessary!” Speaking at Simon Black’s Offshore Tactics workshop, the so-called modern day Cicero goes on to point out that France’s Hollande is “the number 1 among idiots running countries around the world,” and worries that Merkel’s pending election means there will be more and more ‘tough talk and action’ as she shows the people she is in charge. Simply put he warns, alongside Ron Paul, that if you have money in European banks, “Get your money out,” because, “when the next phase of the disaster comes, they will come for you.”

.

top of page ^

Egypt Seeks Bailout

Official: Iraq rejects Egypt request for $4B bond deposit, talks under way for smaller amount

Published March 29, 2013

SOURCE

BAGHDAD –  An Iraqi official says Baghdad has rejected a request from Egypt for a $4 billion bond to be deposited in Egypt’s central bank to bolster its faltering economy.

The official said on Friday that it’s “too risky” to deposit such a large sum in Egypt but that talks are continuing for a smaller amount. The official didn’t elaborate. He spoke on condition of anonymity because he wasn’t authorized to talk to the media.

In Egypt, the presidency’s media office confirmed in a statement to The Associated Press that discussions with Iraq are ongoing.

Egypt’s planning minister, Ashraf el-Araby, visited Iraq this week.

Egypt has sought help from several oil-wealthy Arab countries to shore up reserves in its central bank, which were depleted in the aftermath of Hosni Mubarak’s 2011 ouster.

.

top of page ^

Words Of Warning: Get Your Money Out Of European Banks

Central bank of cyprus

Central bank of cyprus (Photo credit: Wikipedia)

 

Michael Snyder
Economic Collapse
March 25, 2013

 

If you still have money in European banks, you need to get it out.  This is particularly true if you have money in southern European banks.  As I write this, the final details of the Cyprus bailout are being worked out, but one thing has become abundantly clear: at least some depositors are going to lose a substantial amount of money.  Personally, I never dreamed that they would go after private bank accounts in Europe, but now that this precedent has been set it should be apparent to everyone that no bank account will ever be considered 100% safe ever again.  Without trust, a banking system simply cannot function, and right now there are prominent voices on both sides of the Atlantic that are loudly warning that trust in the European banking system has been shattered and that people need to get their money out of those banks as rapidly as they can.  Even if you don’t end up losing a significant chunk of your money, you could still end up dealing with very serious capital controls that greatly restrict what you are able to do with your money.  Just look at what is already happening in Cyprus.  Cash withdrawals through ATMs have now been limited to 100 euros per day, and when the banks finally do reopen there will be strict limits on financial transactions in order to prevent a full-blown bank run.  And of course anyone with half a brain will be trying to get as much of their money as they can out of those banks once they do reopen.  So the truth is that the problems for Cyprus banks are just beginning.  The size of the “bailout” that will be needed to keep those banks afloat will just keep getting larger and larger the more money that is withdrawn.  Cyprus is heading for a complete and total banking meltdown, and because the economy of the island is so dependent on banking that means that the economy of the entire nation is going to collapse.  Sadly, similar scenarios will soon start playing out all over Europe.

 

So if you hear that a “deal” has been reached to “bail out” Cyprus, please keep in mind that the economy of Cyprus is going to collapse no matter what happens.  It is just a matter of apportioning the pain at this point.

 

According to the New York Times, it looks like much of the pain is going to be placed on the backs of those with deposits of over 100,000 euros…

 

The revised terms under discussion would assess a one-time tax  of 20 percent on deposits above 100,000 euros at the Bank of Cyprus, which has the largest number of savings accounts on the island. Because the Bank of Cyprus suffered huge losses on bets that it took on Greek bonds, the government appears to be taking  depositors’ money to help plug the hole.

A separate tax of 4 percent would be assessed on uninsured deposits at all other banks, including the 26 foreign banks that operate in Cyprus.

 

Does that sound bad to you?

 

Well, if a deal is not reached, there is a possibility that those with uninsured deposits could lose everything.  According to Ekathimerini, EU officials are telling Cyprus to choose between a “bad scenario” and a “very bad scenario”…

 

The main question surrounds the future of the island’s largest lender, Bank of Cyprus. If unsecured deposits (above 100,000 euros) at all Cypriot banks are taxed then large savings at Bank of Cyprus are likely to be taxed between 20 and 25 percent. If the levy is not imposed on deposits at other lenders, the haircut for Bank of Cyprus customers will be much larger.

The option of a full bail in of Bank of Cyprus depositors is still on the table. As with the Popular Bank of Cyprus (Laiki), which is to go through a resolution process, the full bail in option could lead to deposits above 100,000 euros being lost. The only compensation for unsecured depositors will be shares in the “good” bank that will be created by a possible merger between the “healthy” Laiki and Bank of Cyprus entities.

When asked by Kathimerini how the Cypriot economy will survive if all company and personal deposits above 100,000 euros disappear from the country’s two biggest lenders, the EU official said: “Unfortunately, Cyprus’s choices are between a bad scenario and a very bad scenario.”

 

So what percentage of the deposits in Cyprus are uninsured deposits?

 

Well, nobody knows for sure, but according to JPMorgan close to halfof the total amount of money on deposit in EU banks as a whole is uninsured.

 

Do you think that some of those people will start moving their money to safer locations after watching how things are going down in Cyprus?

 

They would be crazy if they didn’t.

 

And if you think that “deposit insurance” will keep you safe, you are just being delusional.

 

According to CNBC, very strict capital controls are coming to Cyprus.  These rules will apply even to accounts that contain less than 100,000 euros…

 

Financial controls are coming. Depositors with less than 100,000 euros may not lose their money outright, but they won’t like the restrictions–no matter how much they have in the bank. Limits on withdrawals, limits on check cashing, and perhaps even outright conversion of checking accounts into fixed term deposits are coming (translation: you don’t have a checking account, you have a bond from the bank).

 

A lot of people are going to lose a lot of money in Cyprus banks, and a significant percentage of them are going to be Russian.

 

And as I wrote about the other day, you don’t want to have the Russians mad at you.

 

According to the Guardian, Moscow is already considering various ways that it might “punish” the EU…

 

However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: “If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.

“Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy.”

 

Could this be the start of a bit of “economic warfare” between east and west?

 

One thing is for sure – the Russians simply do not allow people to walk all over them.

 

Meanwhile, things in Cyprus are getting more desperate with each passing day.  Because they cannot get money out of the banks, many retail stores find themselves running low on cash.  In a few more days many of them may not be able to function at all…

 

Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. “At the moment, supplies will last another two or three days,” said Adamos Hadijadamou, head of Cyprus’s Association of Supermarkets. “We’ll have a problem if this is not resolved by next week.”

 

But do you know who was able to get their money out in time?

 

The insiders.

 

According to the Daily Mail, the President of Cyprus actually warned “close friends” about what was going to happen and told them to get their money out Cyprus…

 

Cypriot president Nikos Anastasiades ‘warned’ close friends of the financial crisis about to engulf his country so they could move their money abroad, it was claimed on Friday.

 

Overall, approximately 4.5 billion euros was moved out of Cyprus during the week just before the crisis struck.

 

Wouldn’t you like to get advance warning like that?

 

Well, at this point it does not take a genius to figure out what to do about any money that you may have in European banks.  The following is from a recent Forbes article by economist Laurence Kotlikoff…

 

Whatever happens, no one is going to trust or use Cypriot banks.  This will shut down the country’s financial highway and flip Cyprus’ economy to a truly awful equilibrium in a replay of our own country’s Great Depression, which was kicked off by the failure of one-in-three U.S. banks.

Cyprus is a small country.  Still, the failure of its banks could trigger massive bank runs in Greece.  After all, if the European Central Bank is abandoning Cypriot depositors, they may abandon Greek depositors next.  A run on Greek banks could then spread to Portugal, Ireland, Spain, and Italy and from there to Belgium and France and, you get the picture, to other countries around the globe, including, drum roll, the U.S.   Every bank in each of these countries has made promises they can’t keep were push come to shove, i.e., if all depositors demand their money back immediately.

We’ve seen this movie before.  And not just in real life.  Every Christmas our tellys show It’s a Wonderful Life in which banker Jimmy Stewart barely saves his small town from economic ruin arising from a banking panic.

 

Others are being even more blunt with their warnings.  For example, Nigel Farage, a member of the European Parliament, is warning everyone to get their money out of southern European banks while they still can…

 

The appalling events in Cyprus over the course of the past week have surpassed even my direst of predictions.

Even I didn’t think that they would stoop to stealing money from people’s bank accounts. I find that astonishing.

There are 750,000 British people who own properties, or who live, many of them in retirement down in Spain.

Our message to expats now that the EU has crossed this line, must be: Get your money out of there while you’ve still got a chance.

 

And Martin Sibileau is proclaiming that if you still have an unsecured deposit in a eurozone bank that you should have your head examined…

 

What are depositors of Euros faced with today? Anything but a clean bet! They don’t know what the expected loss on their capital will be, because it will be decided over a weekend by politicians who don’t even represent them.  They don’t really know where their deposits went to and they also ignore what jurisdiction they really belong to. Finally, depositors are paid mere basis points for their trust in the system vs. the 20% p.a. Argentina offered in 2001 (thanks to the zero-interest rate policies of the 21stcentury). In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!

 

So where should you put your money?

 

I don’t know that there is anywhere that is 100% safe at this point.  But many are pointing to hard assets such as gold and silver.  The following is what trends forecaster Gerald Celente had to say during one recent interview

 

“People always say to me, ‘Mr. Celente you are always talking about gold.  What are you going to do with gold when everything collapses and there is no money?’  Well, let’s say you are a Cypriot and all of the ATM machines are out of money and the banks are closed?  Do you think those pieces of silver are going to buy you what you need?  Do you think that ounce of gold is going to get you what you want?

That’s the real money.  There is no other money.  When it all comes down, gold and silver are the only things you have to buy what you need, get what you want, or even get out if you need to.”

 

I used to tell people that putting their money in U.S. banks was safer than putting it other places because U.S. bank deposits are covered by deposit insurance up to a certain amount.

 

But now we see that deposit insurance means absolutely nothing.  If they decide to “tax” (i.e. steal) your money from your bank accounts they will just go ahead and do it.

 

So what should we all do?

 

Personally, I think that not having all of your eggs in one basket is a wise approach.  If you have your wealth a bunch of different places and in several different forms, I think that will help.

 

But as the global financial system falls apart, there will be no such thing as 100% safety.  So if you are looking for that you can stop trying.

 

Our world is becoming a very unstable place, and things are going to get a lot worse.  We are all going to have to adjust to this new paradigm and do the best that we can.

 

.

 

top of page ^

 

Cyprus secures bailout, avoids bankruptcy


Protesters hold a banner during an anti- bailout rally outside of European Union house in capital Nicosia, Cyprus, Sunday, March 24, 2013. After failing for a week to find a solution to a crisis that could force their country into bankruptcy, Cypriot politicians turned to the European Union on Sunday in a last-ditch effort to help the island nation forge a viable plan to secure an international bailout. (AP Photo/Petros Karadjias)

SOURCE

BRUSSELS (AP) — Cyprus secured a 10 billion euro ($13 billion) package of rescue loans in tense, last-ditch negotiations early Monday, saving the country from a banking system collapse and bankruptcy.

“We’ve put an end to the uncertainty that has affected Cyprus and the euro area over the past week,” said Jeroen Dijsselbloem, who chairs the meetings of the 17-nation eurozone’s finance ministers.

In return for the bailout, Cyprus must drastically shrink its outsized banking sector, cut its budget, implement structural reforms and privatize state assets, he said.

The cash-strapped Mediterranean island nation has been shut out of international markets for almost two years. It needs the bailout to recapitalize its ailing lenders and keep the government afloat. The European Central Bank had threatened to cut crucial emergency assistance to the country’s banks by Tuesday without an agreement.

Without a deal by Monday night, the tiny Mediterranean island nation of about 1 million would have faced the prospect of bankruptcy, which could have forced it to become the first country to abandon the euro currency. That precedent would have roiled markets and spurred turmoil across the entire eurozone of 300 million people, analysts said, even though Cyprus only makes up less than 0.2 percent of the eurozone’s 10 trillion euro economy.

The finance ministers accepted the plan reached in 10 hours of negotiations in Brussels between Cypriot officials and the so-called troika of creditors: the International Monetary Fund, the European Commission and the European Central Bank.

“We believe that this will form a lasting, durable and fully financed solution,” said IMF chief Christine Lagarde.

Under the plan, Cyprus’ second-largest bank, Laiki, will be restructured and holders of bank deposits of more than 100,000 euros will have to take losses, Dijsselbloem said, adding that it was not yet clear how severe the losses would be.

“This will have to be worked out in the coming weeks,” he added, noting that it is expected to yield 4.2 billion euros overall. Analysts have estimated investors might lose up to 40 percent of their money.

Savers’ deposits with all Cypriot banks of up to 100,000 euros will be guaranteed by the state in accordance with the EU’s deposit insurance guarantee, Dijsselbloem said. Laiki will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation’s biggest lender, Bank of Cyprus.

Large deposits with Bank of Cyprus above the insured level will be frozen until it becomes clear whether or to what extent they will also be forced to take losses, the Eurogroup of finance ministers said in a statement.

Dijsselbloem defended the creditors’ approach to make deposit holders take heavy losses, saying the measures “will be concentrated where the problems are, in the large banks.”

The international creditors, led by the IMF, were seeking a fundamental restructuring of the outsized financial system, which is worth up to eight times the country’s gross domestic product of about 18 billion euros. They said the country’s business model of attracting foreign investors, among them many Russians, with low taxes and lax financial regulation has backfired and must be upended.

For Cyprus, the drastic shrinking of its financial sector, the loss of confidence with the recent turmoil and the upcoming austerity measures means that the country is facing tough times.

“The near future will be very difficult for the country and its people,” acknowledged the EU Commission’s top economic official Olli Rehn. “But (the measures) will be necessary for the Cypriot people to rebuild their economy on a new basis.”

To secure a rescue loan package, Nicosia had to find ways to raise several billion euros so it could qualify for the 10 billion euro bailout package. The bulk of that money is now being raised by forcing losses on large deposit holders, with the remainder coming from tax increases and privatizations. The creditors had insisted that Cyprus couldn’t receive more loans because that would make its debt burden unsustainably high.

A plan agreed to in marathon negotiations earlier this month called for a one-time levy on all bank depositors in Cypriot banks. But the proposal ignited fierce anger among Cypriots because it also targeted small savers. It failed to win a single vote in the Cypriot Parliament.

In an illustration of the depth of the fear of a banking collapse, Cyprus’ central bank on Sunday imposed a daily withdrawal limit of 100 euros ($130) from ATMs of the country’s two largest banks to prevent a bank run by depositors worried about their savings.

Cypriot banks have been closed this past week while officials worked on a rescue plan, and they are not due to reopen until Tuesday. Cash has been available through ATMs, but long lines formed and many machines have quickly run out of cash.

The Cypriot government also voted a set of laws over the past week to introduce capital controls, to avoid a huge depositor flight once its banks will reopen.

After the eurozone’s finance ministers’ approval, several national parliaments in eurozone countries such as Germany then must also approve the bailout deal, which might take another few weeks. EU officials said they expect the whole program to be approved by mid-April.

.

top of page ^