Experts say institutions will grab deposits without warning28 Sep 2013 by Clark Kent
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.
Financial analyst Jim Sinclair warned that the U.S. banks most likely to be “bailed-in” by their depositors are those institutions that received government bail-out funds in 2008-2009.
Such a “bail-in” means all savings of individuals over the insured amount would be confiscated to offset such a failure.
“Bail-ins are coming to North America without any doubt, and will be remembered as the ‘Great Leveling,’ of the ‘great Flushing’ (of Lehman Brothers),” Sinclair said. “Not only can it happen here, but it will happen here.
“It stands on legal grounds by legal precedent both in the U.S., Canada and the U.K.”
Sinclair is chairman and chief executive officer of Tanzania Royalty Exploration Corp. and is the son of Bertram Seligman, whose family started Goldman Sachs, Solomon Brothers, Lehman Brothers, Bache Group and other major investment banking firms.
Some of the major banks which received federal bailout money included Bank of America, Citigroup and JPMorgan Chase.
“When major banks fail, they are going to bail them out by grabbing the money that is in your bank accounts,” according to financial expert Michael Snyder. “This is going to absolutely shatter faith in the banking system and it is actually going to make it far more likely that we will see major bank failures all over the Western world.”
Given the dire financial straits the U.S. finds itself in, these financial experts say that Congress could look at the example of the European Parliament, which recently started to consider action that would allow banks to confiscate depositors’ holdings above 100,000 euros. Generally, funds up to that level are insured.
Finance ministers of the 27-member European Union in June had approved forcing bondholders, shareholders and large depositors with more than 100,000 euros in their accounts to make the financial sacrifice before turning to the government for help with taxpayer funds.
Depositors with less than 100,000 euros would be protected. Considering protection of small depositors a top priority, the E.U. ministers took pride in saying that their action would shield them.
“The E.U. has made a big step towards putting in place the most comprehensive framework for dealing with bank crises in the world,” said Michel Barnier, E.U. commissioner for internal market and services.
The plan as approved outlines a hierarchy of rescuing struggling banks. The first will be bondholders, followed by shareholders and then large depositors.
Among large depositors, there is a hierarchy of whose money would be selected first, with small and medium-sized businesses being protected like small depositors.
“This agreement will effectively move us from ad hoc ‘bail-outs’ to structured and clearly defined ‘bail-ins,’” said Michael Noonan, Ireland’s finance minister.
The European Parliament is expected to finalize the plan by the end of the year.
The purpose of this “bail-in,” patterned after the Cyprus model, is to offset the need for continued taxpayer bailouts that have come under increasing criticism of the more economically well-off countries such as Germany.
Last March, Cyprus had agreed to tap large depositors at its two leading banks for some 10 billion euros in an effort to obtain another 10 billion European Union bailout.
While this action prevented the collapse of Cyprus’ two top banks, the Bank of Cyprus and Popular Bank of Cyprus, it greatly upset depositors with savings more than 100,000 euros.
WND recently revealed that the practice of “bail-ins” by Cyprus a year ago was beginning to spread to other nations as large depositors began to see their balances plunge literally overnight.
A “bail-in,” as opposed to a bailout that countries especially in Europe have been seeking from the International Monetary Fund and the European Union, is a recognition that such outside monetary injections won’t be forthcoming.
Sinclair said that the recent confiscation of customer deposits in Cyprus was not a “one-off, desperate idea of a few Eurozone ‘troika’ officials scrambling to salvage their balance sheets.”
“A joint paper by the U.S. federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) dated December 10, 2012 shows, that these plans have been long in the making, that they originated with the G20 Financial Stability Board in Basel, Switzerland, and that the result will be to deliver clear title to the banks of depositor funds,” Sinclair said.
He pointed that while few depositors are aware, banks legally own the depositors’ funds as soon as they are put in the bank.
“Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay,” Sinclair said.
“But until now, the bank has been obligated to pay the money back on demand in the form of cash,” he said. “Under the FDIC-BOE plan, our IOUs will be converted into ‘bank equity.’ The bank will get the money and we will get stock in the bank.”
“With any luck,” Sinclair said, “we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.”
Such plans already are being used, or under consideration, in New Zealand, Poland, Canada and several other countries.
Are George Soros, The IMF And The World Bank Purposely Trying To Scare The Living Daylights Out Of Us?
Over the past couple of weeks, George Soros, the IMF and the World Bank have all issued incredibly chilling warnings about the possibility of an impending economic collapse. Considering the power and the influence that Soros, the IMF and the World Bank all have over the global financial system, this is very alarming. So are they purposely trying to scare the living daylights out of us? Soros is even warning of riots in the streets of America. Unfortunately, way too often top global leaders say something in public because they want to “push” events in a certain direction. Do George Soros and officials at the IMF and World Bank hope to prevent a worldwide financial collapse by making these statements, or are other agendas at work? We may never know. But one thing is for sure – many of the top financial officials in the world are using language that is downright “apocalyptic”, and that is not a good sign for the rest of 2012.
Right now, George Soros is saying things that he has never said before. Just check out what George Soros recently told Newsweek….
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
Later on in that same article, Soros is quoted as saying that we could soon see the U.S. government using “strong-arm tactics” to crack down on rioting in the streets of major U.S. cities….
As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”
It almost sounds like George Soros is anticipating the same kind of a breakdown of society that many survivalists and preppers are getting ready for.
So how bad are things going to get?
Well, George Soros is publicly warning that the coming financial crisis could end up being even worse than 2008. Just check out the following quotes from him that appeared in a recent Businessweek article….
“We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”
But George Soros is not the only one issuing these kinds of warnings.
Once again, the head of the IMF, Christine Lagarde, has made a speech in which she openly warned that we are heading for a repeat of the “1930s”.
She told an audience in Berlin on Monday that the globe is facing “a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand”.
During the speech she called for a trillion more dollars to support financially troubled governments, and she made the following statement….
“It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”
As I wrote about the other day, the World Bank has also been using apocalyptic language about the global financial situation. In a shocking new report, the World Bank revised GDP growth estimates for 2012 downward very sharply, it warned that Europe could be facing financial collapse at any time, and it instructed the rest of the world to “prepare for the worst.”
The lead author of the report, Andrew Burns, said that the “importance of contingency planning cannot be stressed enough” and that if there is a major financial crisis in Europe the entire globe will be deeply affected….
“An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.”
So should we be alarmed that George Soros, the IMF and the World Bank are all proclaiming that a financial nightmare could be just around the corner?
Of course we should be.
Whether their motives are pure or not, they are telling the truth about the global financial situation in this case. As I have written about so frequently, there are a whole host of signs that indicate that we could be on the verge of a major global recession.
A lot of folks in the investment world are warning that hard times are about to hit us as well. For example, the following is what legendary investor Joseph Granville recently told Bloomberg Television….
Joseph Granville, whose “sell everything” call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume.
“Volume precedes prices,” Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on “Street Smart” on Bloomberg Television. “You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”
Considering all of the warnings out there, it only seems prudent to prepare for the worst.
But unfortunately, a lot of people are just going to leave their holdings sitting out there like a dead duck, and they are going to be absolutely devastated by the coming financial tsunami.
Those that believe that the United States can somehow escape the coming financial storm don’t really know what they are talking about.
In fact, there was very troubling news for the U.S. dollar just the other day. It was announced that India will start paying for its oil from Iran in a currency other than U.S. dollars.
But this is just another sign that the rest of the world is starting to reject the U.S. dollar. For decades, the U.S. dollar has been the reserve currency of the world and this has given us a tremendous advantage. Unfortunately for us, that is now changing.
U.S. newspapers are not talking about what is going on, but mainstream newspapers in Europe are. Right now, some of the biggest countries in the world are working on plans to quit using U.S. dollars for the buying and selling of oil.
The following comes from a recent article in The Independent….
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
This is a very big deal, and if this gets pulled off it is going to have devastating consequences for the U.S. dollar and for the U.S. economy.
But of course when it comes to troubles for the U.S. financial system, there are a whole host of issues that could be talked about.
An environment for a “perfect storm” is developing, and most Americans have absolutely no idea what is about to happen.
Fortunately, there are some researchers out there that are working hard to sound the alarm bells. For example, the following quote comes from a recent interview with Gerald Celente….
I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they’ll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else.
It would be wise to listen to what experts such as Gerald Celente are saying.
Now is the time to take stock of where you are at and to make plans for the coming year.
Just because things have “always” been a certain way does not mean that they will continue to be that way.
Just because certain things have “always” worked in the past does not mean that they will continue to work in the future.
Our world is experiencing fundamental changes. It is changing at a faster pace than we have ever seen before. The way that we all live our lives five or ten years from now will be vastly different from how we live our lives today.
This will be a very challenging time to be alive, but it is also going to be a very exciting time to be alive.
So what do all of you think is going to happen in 2012?
- Soros Warns of ‘Riots,’ ‘Brutal’ Clampdowns & Possible Total Economic Collapse (mb50.wordpress.com)
- Soros Mouthpiece Calls On Google To Police “Conspiracy Theories” (mb50.wordpress.com)
- George Soros Says … (tarpon.wordpress.com)
- George Soros on the Coming U.S. Class War – The Daily Beast (tribuneofthepeople.com)
AP | Jan. 18, 2012, 4:44 AM
It’s a sign of stress in the banking system. The high deposits in the ECB’s safe haven indicate banks are unwilling to lend to each other because they are afraid they might not be paid back.
The Tuesday deposits were reported Wednesday. They broke the old record of euro501.9 billion from Monday.
The eurozone debt crisis is pressuring banks because they hold government bonds issued by countries with shaky finances, and could suffer losses on those bonds if the countries do not pay or the bonds fall in value.
Banks took euro489 billion in emergency loans from the ECB last month, leaving the system awash with cash.
by Eric Platt
The dark clouds in the Federal Reserve’s 2012 annual stress test are keeping bankers up at night, as banks are being asked to imagine their balance sheet situation under some horrible economic scenarios.
Here are some of the key metrics, complete with headline numbers, for what would happen in the Fed’s worst scenario:
U.S. Real GDP:
- 4Q11: -4.84%
- 1Q12: -7.98%
- 2Q12: -4.23%
- 3Q12: -3.51%
- 4Q12: +0.00%
- 1Q13: +0.72%
- 2Q13: +2.21%
- 3Q13: +2.32%
- 4Q13: +3.45%
- 4Q11: 9.68%
- 1Q12: 10.58%
- 2Q12: 11.40%
- 3Q12: 12.16%
- 4Q12: 12.76%
- 1Q13: 13.00%
- 2Q13: 13.05%
- 3Q13: 12.96%
- 4Q13: 12.76%
U.S. 10-Year Treasury Yield:
- 4Q11: 2.07%
- 1Q12: 1.94%
- 2Q12: 1.76%
- 3Q12: 1.67%
- 4Q12: 1.76%
- 1Q13: 1.74%
- 2Q13: 1.84%
- 3Q13: 1.98%
- 4Q13: 1.97%
Dow Jones Industrial Average Price:
- 4Q11: 9,504.48
- 1Q12: 7,576.38
- 2Q12: 7,089.87
- 3Q12: 5,705.55
- 4Q12: 5,668.34
- 1Q13: 6,082.47
- 2Q13: 6,384.32
- 3Q13: 7,084.65
- 4Q13: 7,618.89
EU Real GDP:
- 4Q11: -1.03%
- 1Q12: -3.49%
- 2Q12: -5.40%
- 3Q12: -6.91%
- 4Q12: -4.92%
- 1Q13: -0.88%
- 2Q13: +0.35%
- 3Q13: +1.11%
- 4Q13: +1.50%
Remember, banks have less than two months to stress test their portfolios against these, and 21 other metrics. For a full list of scenario inputs visit the Federal Reserve’s site.
- The doomsday scenarios the Fed wants banks to test (business.financialpost.com)
- Fed Sets Jan 9 for New Round of Fin Inst Stress Tests (forexlive.com)
- The Fed’s Stress Tests: Too Little, Too Late (247wallst.com)
- Federal Reserve Board issues final rule on annual capital plans, launches 2012 review (bespacific.com)
- Top U.S. banks told to stress test against severe recession (business.financialpost.com)
- Federal Reserve Will Force 31 Banks To Stress Test Portfolios (GS, BAC, JPM, MS, WFC, MET, AXP) (businessinsider.com)
- Fed FAQ Re Fin Institution Stress Tests (forexlive.com)
- Fed Tells Top U.S. Banks to Submit Capital Plans (businessweek.com)
It published a long-awaited list of “systemically important” banks Friday. Banks on the list will have to cooperate with regulations imposed by the agency as well as the Basel Committee of Banking Supervision.
Here are some of those new rules (via WSJ):
– By the end of 2012, all banks will have to map out a plan to unwind their businesses in the case of a collapse.
– By 2016 they have to hold more capital than other banks. They’ll be sorted into five different “buckets,” based on which they’ll be required to maintain 1%-3.5% more capital than less significant banks.
– By 2019, that capital requirement will be an added 3.5% on top of other regulations.
The list will be updated every November and the methodology to choose the banks will be reviewed every three years.
- Global regulators publish list of too-big-to-fail banks (business.financialpost.com)
- Why the big banks aren’t sweating Bank Transfer Day (blogs.reuters.com)
- Here’s Your Official List of 29 ‘Too Big to Fail’ Banks [Banksters] (gawker.com)
- ICBA Statement on Conclusion of House-Senate Conference on the Financial Reform Bill (prweb.com)
- 2 Big 2 Fail (maxredline.typepad.com)
- Saturday, November 5th is Bank Transfer Day – Move Your Money Out of ‘Too Big to Fail’ (crooksandliars.com)
- ‘Too big to fail’ Barclays, RBS, Lloyds and HSBC will be forced to increase capital buffers (telegraph.co.uk)
- Megabanks may face new international rule (search.japantimes.co.jp)