Bailouts: Out; Bail Ins: In; Slowly Boilin’ The Frog (April 15, 2013)

. . .

CD1      “Makes you wonder what we get for today’s tax payment.  The Dodd-Frank legislation states that we the taxpayers will not bail out banks and other connected businesses again for failed derivatives and the like.  So the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve (Fed) admit they cannot do their jobs and force the individual depositor to bail out the banks and other connected businesses.”

CD2      “At least now they claim that they will not take our tax dollars directly but will take our money indirectly.  Banks in America still exist to provide taxpayers with regular opportunities to bail them out.  And to pay huge and undeserved bonuses.  And on occasion to finance an upstart organic neighborhood grocery stand.”

CD1      “While individual states serve as laboratories for social and economic experiments, other countries provide insight into responses to social and economic problems.  The response in Cyprus to the banking crisis that afflicts every country today is revealing.  Instead of the taxpayers bailing out the bank, the banksters took deposits from individual depositors to cover shortfalls.  A ‘bail in’ rather than a ‘bailout’ is the way they brand it.”

CD2      “That has been the official policy in the United States and England since December 10, 2012.  The FDIC may promise to insure deposits up to $250,000, but that promise may be repudiated or supplanted or modified by the FDIC’s new formal and promulgated confiscatory policy.  They title their marching orders ‘Resolving Globally Active, Systemically Important, Financial Institutions.’  The Federal Reserve joined in the task and in effect issued a joint press release stating:  ‘Your Deposits Are No Longer Insured.  Get Your Money Out Of Banks Now.’  Taxpayers cannot say that the government did not properly warn them.”

CD1      “The only event that really threatens the banking system is a literal run on the banks.  News broadcasts will have a field day interviewing those in line if they stay in line and the outraged ‘man on the street’ demanding his deposit.  However, by privately stealing funds from the public, there is no single public event to steel public attention and ire.”

CD2      “Failing banks were always taken over by a receiver and the small depositors recompensed by the FDIC.  However, if a bank fails today, the derivatives that doomed and continue to doom the economy are afforded super-priority status.  Ordinary depositors are booted to the back of the line.”

CD1      “Or the ordinary depositor is kicked completely out of the creditor’s queue and given worthless stock in the failed bank.  Four months have passed without an uncompensated failure.  A fortnight will pass and perhaps another four years without incident, but this banking fraud cannot go on forever.” 

. . .

CD1      “The insurance on up to $250,000 in deposits ostensibly provided by the FDIC has exacerbated the ‘moral hazard’ by disconnecting the individual investor from the process.  Individuals do not even make a cursory inquiry into the viability of a financial institution.”

CD2      “Should the depositor be obligated to do so or should the banking system be regulated and monitored by the government.  The answer is that the banks are inadequately regulated and monitored by the government, so by default it is ‘depositor beware.’”

CD1      “If depositors were rational as rationality is defined by economists and in the face of near zero transactions costs, they would transfer their funds to a credit union.  The National Credit Union Association (NCUA) has not joined the ‘bail in’ scheme publicly at this time.”

CD2     “A depositor who is rational as defined by economists realizes that interest rates are near zero and thus the benefit of leaving money in a bank is near zero unless the money is safe.  The potential costs are far more than zero and thus the depositor should transfer the money to a safe location such as a safe located in the basement.”      

. . .

CD1      “They say that if a frog in a pot of water is brought to a slow boil, it will not know or respond to what is happening, but if the frog is thrown in a pot of boiling water, it will jump out.”

CD2      “MF Global is forgotten.  They are slowly turning up the heat without response.”

CD1      “At least the frog reacts.  I’m tired of ‘bailing out’ and now ‘bailing in’ banks and am bailing on banks.”

. . .

[Peruse the government scheme titled “Resolving Globally Active, Systemically Important, Financial Institutions” at http://www.fdic.gov/about/srac/2012/gsifi.pdf and the similar policy in New Zealand at http://www.rbnz.govt.nz/finstab/banking/4430900.html.]

[Reflect on the discussion in http://www.voxy.co.nz/politics/national-planning-cyprus-style-solution-greens/5/150410, http://www.publicbankinginstitute.org/ and http://webofdebt.wordpress.com/2013/04/09/winner-takes-all-the-super-priority-status-of-derivatives/.]

[See the “e-ssays” titled Money “In The Bank” Or “Under The Mattress” (October 8, 2012) and Boycott Big Banks – Vote Your Dollars (November 21, 2011).]

Bumper stickers of the week:

I am not so much concerned with the return ON my money as I am with the return OF my money.  Attributed to a number of wits.

“An efficient path for returning the sound operations of the G-SIFI [Globally Active, Systemically Important Financial Institution] to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the individual depositors who were previously assured their deposits are insured] into equity [meaning worthless stock].  In the U.S., the new equity would become capital in one or more newly formed operating entities.”  Page 3 at Paragraph 13 of the publication “Resolving Globally Active, Systemically Important, Financial Institutions.”

Your Deposits Are No Longer Insured.  Federal Deposit Insurance Corporation

Get Your Money Out Of Banks Now.  Federal Reserve

The most condign resolution is to attach the salaries and retirement payments to the employees and retirees of the Fed, the FDIC, the SEC, the OCC, the CFTC, the DoJ, the BoE, the BoA, AIG, GS, S&C, C&B and others to fund any bank shortfalls.  And Congress, the President and the Supreme Court.  Problem resolved. 

“Open Bank Resolution”  “Wikipedia does not have an article with this exact name.”

If banksters were branded terrorists, would there be prosecutions?

42

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