Tag: banks

It can happen in the USA

That doesn’t mean it will happen, of course.  Due to the different structure wealth is stored in various countries, and the fact that the banks require balance-sheet assets rather than cash to cover their debts, I expect US pension funds and stock markets will be tapped before bank deposits are stolen.

However, MF Global has already demonstrated that legally speaking, in the USA, money on deposit is not your own, but rather, belongs to the custodial corporation to use as it sees fit, including as collateral for loans to the custodian.  “The settled position of the law is that when you deposit, the bank
becomes the owner of the money deposited and you become a creditor to
the bank.”  It’s not your money, you’re just loaning the money to the bank, which may or may not pay you back, just like anyone else to whom you loan money.  It’s also worth noting that the FDIC cannot and will not provide protection against this sort of government seizure.  From one of Karl’s readers:

“One of my prep school classmates is one of the head lawyers of the FDIC. I called him tonight and he was completely briefed and aware of the Cyprus situation. When I mentioned the ticker to him, he laughed because he said the FDIC, FSLIC and SIPC have no jurisdiction nor provide any protection against taxes or fees, which Gen kind of implied. A bank run, of course is a different story, but the government can tax you to death and the FDIC, FSLIC and SIPC will just stand by and watch. They also will not cover you for a seizure that is related to a crime, like fraud, terrorism or narcotics violations.”

In other words, you’ve been warned.  If you’re still leaving more in the financial system than the bare minimum you need in order to keep your personal finances flowing, you should be aware that you are taking a distinctly non-zero risk.

It is becoming increasingly clear that Cyprus is a test case.  If the bank heist passes the Cypriot parliament and does not spark bank runs throughout Europe as a result, we will almost certainly see more heists take place.  Italy is most likely next, although Spain and Ireland would also be reasonable candidates, because the EU is aware it will have to act there before Beppe Grillo and his grillini win a majority in the next election and are in a position to prevent them from doing so.  Keep in mind the poll mentioned below was conducted before the recent events in Cyprus.

“A new poll shows surging support for Grillo. The election only added to his
momentum, and he’s now at 30 percent. Almost as worrisome for Europe:
Berlusconi’s PDL has also gained since the election.”

Nor is there any mistaking how Grillo’s MoVimento 5 Stelle is looking at the Cyprus situation: “Signori brutte notizie da Cipro. Il Fondo Monetario con la complicità dell’UE prenderà coattamente il 10% da ogni conto corrente bancario. Dovrebbe essere una notizia da prima pagina su ogni quotidiano e invece non mi sembra di averla vista, potrei sbagliarmi comunque. Siamo davvero sicuri che questa è l’Europa che vogliamo? Gente che vive a migliaia di chilometri di distanza e che prende decisioni così importanti senza interpellare i cittadini.”

“Gentlemen, terrible news out of Cyprus.  The IMF, with the complicity of the EU, will forcibly take 10 percent from every bank account.  This should be front page news on every newspaper and instead, although I could be mistaken, I haven’t seen it anywhere.  Are we really certain that this is the Europe we want?  People living thousands of kilometers away making decisions this important without consulting the citizens?”

The neocons at the American Spectator and other places are screaming that Grillo is a fascist.  They’re not entirely wrong, but what they conveniently leave out of the equation is that the EU is fascist as well.  The only difference is that the EU is a form of international fascism that runs interference for the global banks, (as seen in Cyprus), whereas MoVimento 5 Stelle is an Italian nationalist movement, and as such, is vastly preferable to the EU and its globalist masters.

“A major, MAJOR game changer”

The CEO of Saxo Bank comments on the Cypriot bank raids:

This is full-blown socialism. It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors’ money and 9.9 percent of big depositors’ funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?

I heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.

This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere – not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.

If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer’s money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.

Depositors in other prospective bailout countries must be running scared – is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.

Another open question is what will happen to the huge number of brokerages based in Cyprus? There is about 100 or more FX and other brokers currently operating under the relatively light Cypriot regulation. How will this impact the trustworthiness of these many small institutions? What IS the exact impact on the client deposits they might be holding in Cyprus? Will anyone dare to do business with them going forward?

This is a major, MAJOR game changer and the fallout will be with us for a long time to come. I believe it could be the beginning of the end for the Eurozone as this is an unbelievable blow to the already challenged trust that might be left among investors. Talk about a possible own goal.

Market reaction? it must be very good for gold – and for safe-haven countries like Switzerland, Singapore and economically more healthy non-Euro countries in, for example, Scandinavia. I would think the EUR and associated markets will be undermined by increasing lack of confidence when the full implications become clear for investors.

This is full-blown socialism and I still cannot believe this really happened.

I think it is safe to say that it is very bad news when the actions of the international bankers appalls even their lesser brethren, and when the initial test-action exceeds the worst expectations of about only people to correctly anticipate it coming.

And note that they expect similar actions to take place in the USA as well.  Meanwhile, none of the smugly verbose defenders of the people on the Left appear to have even noticed anything has happened… most likely because this sort of thing is completely beyond their capacity to even comprehend, let alone analyze or anticipate.

You will recall that I have been warning readers to stay out of the stock market and the banking system to the greatest extent possible for some time now.  This is only one of the many reasons why.  Those who were confident in the security of their 401ks should probably reconsider their opinions in light of these mandatory depository “contributions” to the cause of debt restructuring.  As Karl Denninger puts it: “$100 bills in your hand have just been declared to be worth
somewhere between 7-10% more than those “deposited” and “stored” in a
bank.”

I have to admit, once more I’m shown to be somewhat of an optimist.  I expected them to begin with pension and 401k seizures, I never imagined they would go right for the deposits.  But then, as a gangster of an earlier era said, the banks are where the money is.  And in case you were wondering what was going to bring the heavily overbought stock market’s 10-day winning streak to a customarily nasty end, you would appear to have gotten your answer.

UPDATE: Germany and the IMF were originally demanding 40 PERCENT of all bank deposits.

UPDATE II: The Monday bank holiday in Cyprus has already been extended to Tuesday, and will likely be extended to Wednesday as well.  Pay attention, this is how it will happen elsewhere.  If you wait until the announcements hit, you will not be able to do anything until it is too late.

UPDATE III: Now the Cypriot Parliament is belatedly wondering if robbing the entire savings class is a health-conscious decision and dragging its heels. “Cyprus’ parliament on Sunday postponed a debate
and vote on a controversial levy on all bank deposits that the
cash-strapped country’s creditors had demanded in exchange for (EURO)10
billion ($13 billion) in rescue money.  The vote, which had been
expected later Sunday, has been pushed back to Monday afternoon,
parliamentary official Antonis Koutalianos said.  The
announcement set off an immediate scramble among top European officials,
with reports that the European Central Bank was pressuring Cypriot
authorities to hold the vote without delay.”

I expect the confiscations will go through, such things almost always do, but notice how it is always the executive branch that is the first to surrender.  And what a surprise, that the anti-democratic fascists of the EU failed to take into account that they’d have to get the support of the parliament in order to complete their little bank heist.  Also, look for the “Russian money laundering” angle to be talked up on the financial news in an attempt to justify the theft and reduce fears outside of Cyprus, which is, of course, the only place that any thing of the sort could possibly happen just this one time due to impossible-to-foresee emergency circumstances.

UPDATE IV: In what surely is completely unrelated news, the Russian Navy had an announcement today as well: “Russia will dispatch a permanent group of five to six combat ships to
the Mediterranean Sea, Russian Navy chief Admiral Viktor Chirkov said.
Frigates and cruisers will make up the core of the fleet.”

The bank raids begin

It would be reasonable to assume that the bank runs will be next:

£8.7billion EU bailout imposes tax on ALL bank accounts in Cyprus.  Under the deal, all bank deposits over €100,000 will be hit with a levy of 9.9 per cent. Those with smaller savings will pay 6.75 per cent.

The raid will raise €5.8 billion, which will be added to a €10billion bailout from Brussels. But financial experts said the raid – designed to stop Cyprus crashing out of the euro, potentially destroying the currency – would send shock waves through the eurozone.

If savers in other troubled nations fear their accounts might be next, they could withdraw their money and spark a catastrophic run on the banks.

Tell these people, who are losing between 7 percent and 10 percent of their savings, how vitally important it is for Cyprus to remain in the euro.  Especially when there isn’t even the remotest prospect for this blatant theft to repair the situation or do anything more than buy a little more time.

The corruption that encompasses

What you should understand is that everything that has happened since 2008 related in any way to the financial crisis is a lie.  Absolutely everything. It begins with the banks, but it doesn’t end there, the mainstream media and the government are in collusion with them to hide how bad the global situation is and how criminally corrupt the behavior of the banks and their enablers was that created this ongoing debacle:

Back in 2010 I wrote an article about the way German banks used Ireland as a dark pit for doing deals they could not do elsewhere. It was called Ireland was Germany’s Off-shore Tart. It seems she was Belgium’s tart too.

What Sugarman’s story reveals above all is how no one in power, whether that be financial, political or media power, wants any questions asked or truths exposed.  Sugarman has been ignored by everyone in the Irish establishment: his bank, the banks regulator, all the Irish political parties, all the newspapers and I was there when he told his story to one of Ireland’s top TV journalists only to never hear from him again.

Sugarman was the risk manager who resigned from Unicredit when his warnings to senior management, that the bank was routinely failing to hold enough capital to protect depositors from a bank run, were being ignored.

Irish law says clearly a breach of the minimum holdings of even 1% must be notified to the regulator immediately. He was finding UniCredit being routinely 19% short. When he asked an independent company to check his figures they told him the breaches were as high as 40%. This means the bank was short billions. Such a shortfall means if there was run on the bank it would not have a hope of surviving.

Sugarman was ignored and told to stop complaining. He resigned.

A month later Northern Rock collapsed when a run on the bank exhausted its cash reserves. A year later the Irish banks collapsed.

You might have thought the Irish Bank regulator would want to know what Sugarman had to say. You’d be wrong. The Irish regulator has gone out of his way to ignore him. I have been privy to all the emails and correspondence and it is a shameful and tawdry story of obfuscation, lying and threats. Meetings where he was told he could come and tell the regulator what he knew, but that if he revealed any wrong doing by the bank that occurred during the time he was there, the regulator would have to report him to the police.

It’s all a sham.  All of it.  The only thing of which you can be sure is that the various statistics are being portrayed in the best possible light.  Which, in and of itself, is rather grim considering what the reported statistics indicate.

Too big to jail

Karl Denninger considers the Attorney General’s recent admission that the big banks are above the law:

The Rule of Law works and guides a just society only because it applies to everyone.  Nobody gets to rape, rob, pillage or murder.  If you do, no matter who you are, you face the same punishment, the same process, the same sentence.

We all know there are disparities in the process and always have been.  But there’s a difference between the foibles of mankind — everyone has their bias, and there is no such thing as a human process that is flawless — and intentional, designed-in or willful refusal to prosecute certain people for acts that land others in prison.

The latter is the defining action of a dictatorship.

A dictatorship can only exist by declaring war upon the people.  When a certain subset of the population is given license to pillage or worse that is the very definition of “diktat” from which the term “dictatorship” comes.

Fast and Furious, incidentally, falls into this category as well.

This is an extraordinarily dangerous state of affairs and must not be permitted to continue.  The government and its actors have lost all moral and ethical appeal to fair play and the rule of law — by exempting certain people they have declared both themselves and those they exempted beyond the protections that exist in a civilized society.

I’ve previously pointed out that there is no longer “law” as such, in the United States any more.  Everything about the “nation”, which is no longer, properly speaking, even a nation anymore, is fraudulent, from its “money” to its system of “justice”.  Even something as simple and basic as openly fighting a “war” is now beyond its bloated, cancerous make-believe structure.

I wouldn’t call the present system a dictatorship myself.  Dictatorships are more open and direct.  It is better described as a simulatorship, which is to say, rule by pretense.  It is remniscent of the latter days of the Soviet empire, when the Russian people pretended to work and the Soviet government pretended to pay them.  In the latter days of the US empire, the federal government pretends its actions are within the limits set by the U.S. Constitution and the American people pretend to believe them.

If a corporate entity is too big to fail or too big to jail, then logic dictates it must be cut down to a size that permits both.  Remember, corporations are not capitalism, they are creations of government and if they can’t reasonably be imprisoned, they can certainly be “executed”.  And if real American people can be “legally” executed at the order of the president, then can there really be any doubt that artificial American people are also liable to termination on command as well?

This section of the American Banker article particularly struck home:

Many are still angry about the 2008 bank bailouts, and they now have an
on-the-record confirmation from Justice’s top official that the
department is treating big banks softly just because they are large.
Compare it to how law enforcement typically treats American citizens
when they break the law — often times by throwing the book at them — and
it’s easy to understand how that anger could grow into more popular
support for a big bank breakup.

For example, my father was imprisoned for 12 years after being accused of evading $1.6 million in taxes, penalties, and imaginary “interest” despite having paid something like $75 million in state and federal taxes over the previous 20 years and forcing the State of Minnesota to admit that its agents knowingly lied when they falsely claimed he was a resident and seized his house for not paying taxes he didn’t owe. Meanwhile, Congressional investigators estimate that the big US banks launder about $250 billion in drug money every year in addition to their $12 billion in estimated annual mortgage fraud.  When caught, they occasionally pay a monetary penalty calculated at a rate which, in my father’s case, would have amounted to about a $20,000 fine.

So, I can understand why many Americans support a big bank breakup and seeing corporate criminals treated with the same severity as actual human beings.  But it’s not going to happen, because the entire financial system is already on the verge of collapse and all of the insiders know it.  That is why the banks will continue doing whatever they want and the regulators and politicians will continue to look the other way, until the moment when a critical node fails and the entire system breaks down in a manner that can’t be blamed on anyone in particular.

Ireland bolts the stable doors

Long after the horses escaped with all the money:

Ireland’s government rushed through emergency legislation early on Thursday to liquidate the failed Anglo Irish Bank as it tries to secure a deal with the European Central Bank to ease the country’s debt burden….

President Michael D. Higgins will sign the bill into law later on Thursday. He
cut short a state trip to Rome to ensure he could consider it. Anglo Irish and its casino-style lending were at the heart of Ireland’s
financial crisis. The bank’s near collapse in 2008 pressured the government
into guaranteeing the entire financial sector, sucking it into a downward
spiral and in late 2010, a €67.5bn EU-IMF bailout.

Three of the bank’s former executives, including its former CEO, will go on
trial next year on fraud charges. Under Dublin’s plan, the €28bn in promissory notes will be replaced with
long-term government bonds, meaning that Ireland
can make more gradual repayments, a source familiar with the discussions
told Reuters. 

So, instead of simply letting the bank go into liquidation in 2008, the Irish government saddled the Irish people with nearly $100 billion in debt, and now the bank is going to go into liquidation anyhow.

In contrast, thanks primarily to the courage of the Icelandic prime minister, Iceland let its casino banks go bankrupt and resisted the global pressure to saddle the Icelandic people with the bankers’ debts.  Iceland has now put the debt bubble behind it and is growing again; the Irish can’t even make the upcoming payments on a debt that extends for another 10 years.

This is why the bankrupt US banks should have been allowed to fail back in 2008.  Bank bailouts are seldom a solution, they are almost always a simple matter of delaying the day of financial reckoning long enough for the parties responsible to successfully abscond with the gains they have collected from gambling with other people’s money.

Blowing away the backstop

Iceland wins a legal victory with serious international ramifications:

Iceland won a sweeping victory in a court fight over its
responsibilities to foreign depositors in Icelandic bank Landsbanki,
which failed in 2008. The court of the European Free Trade
Association on Monday said Iceland didn’t breach European Economic Area
directives on deposit guarantees by not compensating U.K. and Dutch
depositors in Landsbanki’s online savings accounts, known as Icesave
accounts.

Iceland has blown a large hole in the entire bankocracy.  First, it has shown that a country materially much better off to blow off the bankers, refuse to bail them out, and let them go under than accede to their demands.  Notice that Iceland is not having any trouble borrowing money despite the dire predictions of those running interference for the banks.

Second, it shows that the dubious legal claims about “debts” that are somehow assumed to be magically passed on to parties who were not involved in the debt contracts are false.  And third, it proves that the foreign “deposit guarantees” are absolutely nothing of the sort.

This is serious, because, as Karl Denninger observes: “There are other nations where demands have been made for citizens to cover other, non-citizen losses.  I can think of a few… like, for instance…. Greece…. What this decision does is provide a solid backstop to the opinion that such a guarantee program does not reach beyond the fund and into the general finances of the nation involved, nor can that nation be forced to do so retroactively.”

The first shots are fired

However, at the moment, it’s not violence, merely very loud political protest:

Rifle shots were fired early Monday into the Athens offices of Greece’s conservative party, which leads the fragile coalition government, causing no injuries but intensifying a wave of political violence in the debt-wracked country. 

Remember, the US is actually worse off than Greece, by some financial measures.  The only significant difference is that Greece can’t print money because the ECB won’t permit it, while the US can’t print money because the Fed won’t permit it.

I suspect these are the first shots to be fired in the great wave of political dissolution that is about to sweep over the world.

Obamateach and the post-college tax

After all, you didn’t build that university degree:

Student Loan debt in the U.S. recently crossed the $1 trillion mark,
with a good chunk of that owed to the U.S. government. In an attempt to
streamline the whole process, a soon-to-be-introduced bill would replace
the current system of debt collection with automatic payroll deductions
tied to the borrower’s income.

I wonder how long it will be before it will become illegal to pay for your own college, thus allowing Washington to tap directly into your paycheck perpetuity as compensation for the government investment in your K-16+ education.  We already have a working model for free education with the Obamacare model.  Obamateach is the obvious next step educational for a society moving rapidly Forward! into the 21st century.