Bail-ins, Not Just Bailouts of Big Banks, Coming Soon?
|April 24, 2014||Posted by Staff under Financial|
This 2014 excerpt is of Ellen Brown’s blog, Mar 29.
On March 20, 2014, European Union officials reached an historic agreement that authorizes both bailouts and “bail-ins” – the confiscation of depositor funds.
Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt.
The US, UK, Canada, Australia, New Zealand, and other G20 nations also have bail-in plans for their troubled too-big-to-fail banks.
Bankers win both ways: they can tap up the taxpayers’ money and the depositors’ money.
But at least, you may say, it’s only the uninsured deposits that are at risk (those over €100,000—about $137,000). Right?
Not necessarily. All deposits could be at risk in another meltdown.
Only after the taxpayers – and the depositors – are stuck with the tab will the curtain be lifted and the crippling insolvency of the banks be revealed. Predictably, panic will then set in, credit will freeze, and the banks will collapse, leaving the unsuspecting public to foot the bill.
In Sweden or Finland in the early 1990’s, government did not bail out but nationalized troubled banks [and] took over their management and assets. In the Swedish case the end cost to taxpayers was estimated to have been almost nil.
In the U.S. today, finance charges on credit-money amount to between 30 and 40% of the economy, depending on whose numbers you believe.
Ed. Notes: The above scenario is not far-fetched. Recently in Cyprus depositors lost money. In the US, banks have failed before without returning a penny to depositors (which was why federal insurance was created). Bankers feel no embarrassment demanding bailouts; why not bail-ins, too?
Presently, US banks help themselves to depositor’s money via nit-picking fees and closing one’s account to end a dispute (while keeping the money). Banks also charge usurious amounts for their credit cards, which profit the banks handsomely. Plus, banks play a big role in creating inflation, and do not pay depositors enough interest to keep up with the constant rise in prices.
Further, banks promulgate the modern custom of borrowing to buy land (rather than renting from one’s community). Banks profit enormously from mortgages (both principle and interest). It must be society’s servicing of its mortgage debts that gets included in the figure above — 30%-40% of the price of everything you buy going to lending banks — otherwise that percentage seems way too high.
While bighearted reformers want government to take over banking, that does not reduce our demand for loans. Our need for debt is artificially high; it gets exaggerated by our purchases of land and resources. If we rented locations from our community — as residents and businesses do in Hong Kong, Israel, US port districts, and elsewhere — then the demand for borrowing funds would drop dramatically and bankers would be cut down to size.
That said, letting the public treasury perform some banking functions might not be a bad idea, even if it does not get to the root of the money problem.