[Revi]

I keep hearing about Bail-ins and how they might happen here. At first I scoffed at that idea, but then I found out that there was a piece of legislation passed making it possible here in the US of A. Now a bail-in means that the bank takes depositors money in order to pay off its debts. I found this very interesting article from the St. Louis Fed, in which it explains it, and then says that it hasn't been tried, but it might work. Great...

https://www.stlouisfed.org/publications ... ig-to-fail

[Revi]

Here's a bit from it:
"future remedies for handling troubled financial firms will focus on bailing-in the firm by imposing losses on shareholders and unsecured creditors, instead of bailing out firms and putting taxpayers at risk."

Unsecured creditors means people with money in the bank I think...

[Apneaman]

Every G-20 country has legislation in place. They are ready.


New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners

"On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking."

"Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds.
“Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors."

http://ellenbrown.com/2014/12/01/new-ru ... -pensions/

[dolanbaker]

Don't forget that the money is "loaned into existence" and always belong to the central bank, they're just changing the terms on which they lend it to you!

[dolanbaker]

Saving or "lending to a bank" also has a contract, looks like the banks have rewritten it so they don't have to give you all the money back when you want it, we'll be lucky to get any interest at this rate.
They'll soon be charging a fee for storing it!

[Revi]

I think if people knew about this it would be a powerful disincentive to save money, which may be the point of it. Maybe they are also trying to get more people in to the casino (stocks, etc). Use it or lose it!

[americandream]

I think if people knew about this it would be a powerful disincentive to save money, which may be the point of it. Maybe they are also trying to get more people in to the casino (stocks, etc). Use it or lose it!

There is a concerted push underway to deepen retail trading...however I see this more as a part of the process of labour casualisation in the West than some nefarious plot to rob the masses of their savings. Remember, we are in the culture of caveated sovereignty.

[hvacman]

I seem to remember something called the "FDIC", which was a Federally-administered deposit insurance program. Most depositors in participating banks had their deposits "covered" by the FDIC through an upper limit - I think it was $100K. If the bank failed, the FDIC would refund the depositor the full account value, up to $100K. Deposits over $100K were NOT insured. The understanding was that if the bank failed, those uninsured deposits would be lost. Wouldn't that be a kind-of bail-in?

What happened with that? Did the Federal government basically expand the FDIC to all deposits, regardless of amount?

[Revi]

It would be great if it was limited to accounts more than $100,000, since we have no chance of having that much in a bank...

[dolanbaker]

In the EU the limits have been set at €100,000, so we're OK.

[ROCKMAN]

hman - I think the conversation got off track. The bail in funds would come from the owners of the institution...not the depositors. Basically it sounds like a bankruptcy process. Unsecured debt is always a casualty in such a process.

Yes: FDIC deposite insurance is still in effect and used to prevent depositors from panicking and pulling their funds.

[dolanbaker]

hman - I think the conversation got off track. The bail in funds would come from the owners of the institution...not the depositors. Basically it sounds like a bankruptcy process. Unsecured debt is always a casualty in such a process.

Yes: FDIC deposite insurance is still in effect and used to prevent depositors from panicking and pulling their funds.

Not exactly, in Cyprus they shaved a percentage of all savings over €100k from individual bank accounts to finance the bail-in.

[Tanada]

hman - I think the conversation got off track. The bail in funds would come from the owners of the institution...not the depositors. Basically it sounds like a bankruptcy process. Unsecured debt is always a casualty in such a process.

Yes: FDIC deposite insurance is still in effect and used to prevent depositors from panicking and pulling their funds.

Try reading this ROCKMAN,

Bail-in in Plain English

The Financial Stability Board (FSB) that now regulates banking globally began as a group of G7 finance ministers and central bank governors organized in a merely advisory capacity after the Asian crisis of the late 1990s. Although not official, its mandates effectively acquired the force of law after the 2008 crisis, when the G20 leaders were brought together to endorse its rules. This ritual now happens annually, with the G20 leaders rubberstamping rules aimed at maintaining the stability of the private banking system, usually at public expense.

According to an International Monetary Fund paper titled “From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions”:

Bail-in . . . is a statutory power of a resolution authority (as opposed to contractual arrangements, such as contingent capital requirements) to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity. The statutory bail-in power is intended to achieve a prompt recapitalization and restructuring of the distressed institution.

The language is a bit obscure, but here are some points to note:

What was formerly called a “bankruptcy” is now a “resolution proceeding.” The bank’s insolvency is “resolved” by the neat trick of turning its liabilities into capital. Insolvent TBTF banks are to be “promptly recapitalized” with their “unsecured debt” so that they can go on with business as usual.

“Unsecured debt” includes deposits, the largest class of unsecured debt of any bank. The insolvent bank is to be made solvent by turning our money into their equity – bank stock that could become worthless on the market or be tied up for years in resolution proceedings.

The power is statutory. Cyprus-style confiscations are to become the law.

Rather than having their assets sold off and closing their doors, as happens to lesser bankrupt businesses in a capitalist economy, “zombie” banks are to be kept alive and open for business at all costs – and the costs are again to be to borne by us.

http://ellenbrown.com/2014/12/01/new-ru ... -pensions/

[hvacman]

“Unsecured debt” includes deposits, the largest class of unsecured debt of any bank.

That's interesting. I never thought of my "deposits" in a bank as being essentially an unsecured loan of my assets, though in reality, that is what it is, with them paying me interest on my "loan" while they do other things with my money. When I get home, I think I'll actually read the contract I signed when I opened my bank current accounts. I'll tell ya, if bail-in becomes the case in the US and I can be treated just like any other "creditor" in a bankruptcy proceeding, wherein my "deposit" cash loan can be turned into stock, I want a stock-like return on my investment and risk exposure. Credit cards are essentially unsecured loans. Do you think THE issuing banks get less than 1% annual interest on their loans?

Makes me pine for the old-school, small-town, locally-owned S&L that took local deposits and made local loans on local residential RE properties, had very conservative loan criteria, and paid OK interest. It was when the Feds changed the rules for S&L's in the 80's that allowed their managements to make riskier commercial loans and play investment-bank type games that killed them.

Man, the wool is really being lifted from my eyes....

[careinke]

Wait a minute! Sounds like theft!

You have been living with theft from your government for years. This just takes away the middleman.