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Americans Warned Bank ‘Bail-Ins’ Coming! Experts Say Institutions Will Grab Deposits Without Warning!


  • Americans warned bank ‘bail-ins’ coming! 
    by F. Michael Maloof 
    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.

    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.

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September 30, 2013 - Posted by | Economics, Social Trends | , , , , , , , , , , , ,

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