A safe and a shotgun or publicly-owned banks? The battle of Cyprus

The deposit confiscation scheme has long been in the making. US depositors could be next – Published on Intrepid Report, by Ellen Brown, J.D., March 25, 2013.

… The long-planned confiscation scheme:

  • The deal pushed by the troika—the EU, ECB and IMF—has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.
  • In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand, titled A Primer on Open Bank Resolution, Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland. 
  • The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:
  • . ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors. . . .
  • The spectrum of “creditors” is defined to include depositors:
  • At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.
  • Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:
  • In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet. Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.
  • The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.
  • The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?
  • Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax,’ then deposit insurance is worth absolutely zippo.”

The real profiteers get off scot-free: … //

… It CAN happen here:

  • Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish. The current battle on this tiny island has taken on global significance. If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.
  • That situation could be looming even now in the United States. As Gretchen Morgenson warned in a recent article on the 307-page Senate report detailing last year’s $6.2 billion trading fiasco at JPMorganChase: “Be afraid.” The report resoundingly disproves the premise that the Dodd-Frank legislation has made our system safe from the reckless banking activities that brought the economy to its knees in 2008. Writes Morgenson:
  • JPMorgan . . . Is the largest derivatives dealer in the world. Trillions of dollars in such instruments sit on its and other big banks’ balance sheets. The ease with which the bank hid losses and fiddled with valuations should be a major concern to investors.
  • Pam Martens observed in a March 18 article that JPMorgan was gambling in the stock market with depositor funds. She writes, “trading stocks with customers’ savings deposits—that truly has the ring of the excesses of 1929 …”
  • The large institutional banks not only could fail; they are likely to fail. When the derivative scheme collapses and the US government refuses a bailout, JPMorgan could be giving its depositors’ accounts sizeable “haircuts” along guidelines established by the BIS and Reserve Bank of New Zealand.

Time for some public sector banks? … //

… (full long text including many hyper-links).

(For more on the public bank solution and for details of the June 2013 Public Banking Institute conference in San Rafael, California, see here. Ellen Brown is an attorney and president of the Public Banking Institute, PublicBankingInstitute.org. In “Web of Debt,” her latest of 11 books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com and ellenbrown.com).

Links:

Undoing the New Deal, on TRNN, March 21, 2013;

NYPD’s Stop and Frisk
, on TRNN, March 20, 2013;

Obama’s Still Shopping for a Grand Bargain, on Worker’s Action, by Shamus Cooke, March 19, 2013: President Obama’s recent closed-door sessions with Republican congressmen to reach a “grand bargain” has roused suspiciously little attention in the mainstream media …;

FEATURES: 5th BRICS Academic Forum recommendations, März 20, 2013: The academics believe BRICS have covered significant ground since the inception of the partnership and that they must build upon the progress made by consolidating the agreements reached and the achievements registered and by making further concrete proposals for realising the unfolding objectives of the bloc. The 5th BRICS Academic Forum, comprising experts and scholars from the research and academic institutions of India, China, Brazil, Russia and South Africa, met on the 11th and 12th of March 2013 in Durban …;

Fifth BRICS summit.

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