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Fed Governor Stein Warns When A TBTF Bank Fails, Depositors Will Be Cyprus'ed

Tyler Durden's picture


Two months ago, Fed governor Jeremy Stein caused a major stir among the very serious excel-using economists and other wannabe "scientists"-cum-voodoo witchdoctors, when he hinted that it was the Fed's actions that were leading to "overheating" in the markets. It took quite a bit of rhetoric by other very serious people to talk down his comments and give the impression that the S&P is not about 50% overvalued. Today, Stein has managed to stick his foot in his mouth for the second time in a row, and do what virtually nobody in the status quo is capable of: tell the truth.

In a speech titled "Regulating Large Financial Institutions" Stein made something very clear: if and when a TBTF fails, and since this time is not different, and a failure is only a matter of time, depositors will lose everything (courtesy of some $300 trillion in gross unnetted liabilities which once there is a counterparty chain failure, suddenly become very much net and immediately marginable - a drain of cash), which now that Cyprus is the template, is to be expected. Not only that but Stein makes it all too clear that part of the Dodd-Frank resolution authority guidelines, a bailout is no longer an option.

Perhaps more to the point for TBTF, if a SIFI does fail I have little doubt that private investors will in fact bear the losses--even if this leads to an outcome that is messier and more costly to society than we would ideally like. Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. And as a member of the Board, I am committed to following both the letter and the spirit of the law.

At least he can't say Americans weren't warned when the Cypressing(sic) hammer finally falls.

Oh, and as a reminder...


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Fri, 04/19/2013 - 15:51 | 3473656 The Juggernaut
The Juggernaut's picture

I hope ya'll know that since Boston is on lockdown the Fed Reserve will blame this for the economic slow down.  Which is not thhaaaaaaat far from the truth but still... the ecnomoy was shit well before the Boston State Sponsored Terrorism.

Fri, 04/19/2013 - 15:52 | 3473665 redpill
redpill's picture

Well they were right about Cyprus not being a template for the EU.



It's a template for the entire planet.

Fri, 04/19/2013 - 15:56 | 3473696 AllThatGlitters
AllThatGlitters's picture

OK fence-sitters.  Time to buy gold. Of the physical bullion kind.

Oh look, they took it down and made it nice and cheap for you, thinking it would scare you away:

Live Price:

But this article should be scaring you away from the bank.

That page has nice gold bullion bars for only $21 over spot.

Fri, 04/19/2013 - 16:23 | 3473887 bdc63
bdc63's picture

Dont Cyprus me Bro!

Fri, 04/19/2013 - 18:06 | 3474343 Pharming
Pharming's picture

Does America have an equivalent to Nigel Farage?  

Oh...wait I'll answer that...


Fri, 04/19/2013 - 18:20 | 3474411 sun tzu
sun tzu's picture

Ron Paul

Sat, 04/20/2013 - 02:13 | 3476360 Boris Alatovkrap
Boris Alatovkrap's picture

Justin Timberlake?

Fri, 04/19/2013 - 19:57 | 3474865 saulysw
saulysw's picture

Max Keiser?

Fri, 04/19/2013 - 15:56 | 3473702 kaiserhoff
kaiserhoff's picture

The Federal Reserve:

Finding ways to outlaw private wealth, for one hundred years and counting.

Tick, tick, tick....

Fri, 04/19/2013 - 16:06 | 3473784 toys for tits
toys for tits's picture


Tick, tick, tick....

That sounds very terroristic.

Fri, 04/19/2013 - 20:06 | 3474806 Bansters-in-my-...
Bansters-in-my- feces's picture

You mean terroristick

Fri, 04/19/2013 - 15:58 | 3473722 Stoploss
Stoploss's picture

Yep, this and Carney saying the same.


Better get your fiat out of the bank now before you can't.

Guess what,  it always happens on FRIDAYS.

Fri, 04/19/2013 - 16:53 | 3473935 Kirk2NCC1701
Kirk2NCC1701's picture

Redpill, we'll need a WTSHTF-Chillpill real soon...

Now you know why Obama called all these Finance execs onto his carpet/office?  How do you spell IEEPA?

Plan/hedge accordingly: This is what I expect from Obama et al, in an IEEPA...

   1. PM price beat-down before the Reset --> PM bullion run --> Phyz squeeze, part of Capital Control (flight of capital) prior to Reset.

   2. Likely nationalization (no literal confiscation) of PM --> Payout of paper-PM in fiat money (at low market price).  With price drops, no windfall profits realized for PM speculators anyway.  PM mines consolidated and nationalized.

   3.  Price & Wage Controls during Emergency/Reset.  Strict supply chain management by TPTB, to prevent panic and hoarding.

   4.  DHS + LEA's there to provide law & order.  Regional Martial Law may be necessary (big cities).  Rioters and militant activists will be treated as Enemy Combatants, and be treated with heavy hand.  Arrested, droned or sent to FEMA camps as appropriate.

Buy+store stuff for at least 3-6 months:  Water, Food, G+A, Key Consumables (TP...), Medicine, Gasoline, Cash, Bullion.  Be a 'Dr. Prepper'!  Be a true friend, and have quality friends --> Safety + Lifestyle in (manageable) numbers.

One to beam up.  Wait... make that 5 to beam up.

Fri, 04/19/2013 - 16:07 | 3473787 freewolf7
freewolf7's picture

You've been warned.

Fri, 04/19/2013 - 16:35 | 3473947 Silver Bug
Silver Bug's picture

They have shown their hand. They will steal from US citizens when the time arises. Why keep more than you have to in the banking system? Keep stacking.

Fri, 04/19/2013 - 17:21 | 3474165 gwar5
gwar5's picture

I was thinking about that today. 


Boston is completely locked down trying to flush out one wounded 19 year old who is surrounded in an urban setting by thousands of militarized police and para-military who can't find him (yet). 

So how are they going to deal with 80 million pissed-off, armed Americans when TPTB go Somali Pirate and financially wipe them all out?  They do not have the man power to take over the country from it's rightful owners. Unpossible.

Fri, 04/19/2013 - 17:28 | 3474193 ArkansasAngie
ArkansasAngie's picture

Rumor I heard said July 11th is the day the ATF wants our guns
Surely tis only a rumor

Sat, 04/20/2013 - 03:52 | 3476416 natty light
natty light's picture

Thousands of cops running around:like a scene out of Blues Brothers.

Sat, 04/20/2013 - 08:07 | 3476598 Winston Churchill
Winston Churchill's picture

More Keystone cops meets Charlie Chaplin IMO.

Fri, 04/19/2013 - 15:52 | 3473661 EscapeKey
EscapeKey's picture

oh i thought the FDIC was there to protect the depositor in that case.

after all, they're so liquid and well-funded, right?

Fri, 04/19/2013 - 15:57 | 3473707 Canadian Dirtlump
Canadian Dirtlump's picture

they are just using a little leverage. LOL!

Fri, 04/19/2013 - 16:09 | 3473801 101 years and c...
101 years and counting's picture

1.15% of GUARANTEED deposits are actually insured.  The FDIC has approximately 45-50B in funds and the amount of insured deposits is just south of $5 trillion.  and anything over 250K?  fuhgettaboutit!

Fri, 04/19/2013 - 18:22 | 3474423 sun tzu
sun tzu's picture

Unless you're a Warren Buffett type, in which case you'll get a heads up to move your funds before the bank holiday

Fri, 04/19/2013 - 15:58 | 3473717 knukles
knukles's picture


He said private investors.
Not depositors.
Means equity holders, preferreds, debt holders, unsecured debt holders and depositors OVER the insurance limit.

So what's wrong with that?
That's the way its supposed to be, FFS
You're insured, you get your money back

Fuck the other stakeholders...
Bond and stock holders are supposed to do their own due diligence and invest accordingly.

What this means(supposedly) is no next time around bailout for a GS or AIG, etc.

And that's good

But then again, there are no laws anymore, are there?

Now, announcing it at a time like this is a whole nother story...
great time to start a run on the banks

And don't forget them Jumbo CD's held in you MMMF

Fri, 04/19/2013 - 16:05 | 3473774 Bearwagon
Bearwagon's picture

"And don't forget them Jumbo CD's held in you MMMF"
You nailed it.

Fri, 04/19/2013 - 16:22 | 3473884 knukles
knukles's picture

Yep... and therein is the systemic risk they (all f the regulators and folks like us) are worried about.
For if the jumbo CDs take a bath, the MMMF industry either breaks the buck or kick in capital (buying the bad paper) as some did last time.
This is exactly why the SEC wants a floating NAV structure... so in bad times breaking the buck is not an exception.

Fri, 04/19/2013 - 17:44 | 3474248 Tapeworm
Tapeworm's picture

knukles I plussed you for your first comment above as I completely agree.

BUT, do the derivative counterparties rank above the insured depositors anyway?

Fri, 04/19/2013 - 20:24 | 3474983 knukles
knukles's picture

Good question and I do not have the particular regulatory and legal background to give a decisive answer.
However, my understanding is that regardless as to a claim on the banks estate in liquidation, the insurance kicks in in the event of a shortfall and thus in that sense, is separate therefrom

Fri, 04/19/2013 - 16:09 | 3473792 Mordenkainen
Mordenkainen's picture

You're assuming that they won't consider having a deposit account a form of investment in the bank. After all, they do collect interest (if you look hard enough with an electron microscope).

Fri, 04/19/2013 - 16:17 | 3473844 knukles
knukles's picture

It's not an "investment" in that sense, but it is a liability of the bank.
And as to secured or unsecured, it is unsecured by the bank but remains "guaranteed by the FDIC which FUll Faith and Credit of the US.
Beats Corzine's charity and good will.

I'd bet the insured gets paid off.
And, BTW, the way it's set up is exactly the standard Ch11 procedure up the balance sheet capital structure.  It just stops with the insured portions of deposits.

Fri, 04/19/2013 - 16:24 | 3473892 LasVegasDave
LasVegasDave's picture

Hey knuckles



Fri, 04/19/2013 - 16:07 | 3473794 Dr. Engali
Dr. Engali's picture

That is the way it should be.The problem to me is the fact the government gets to decide who stays and who goes.

Fri, 04/19/2013 - 16:18 | 3473853 knukles
knukles's picture

Yes, the potential for unequal treatment of like stakeholders.
Aka General Motors where the seniors should have had priority over the unsecured unions.

'nuff said

Fri, 04/19/2013 - 16:50 | 3474013 NoDebt
NoDebt's picture

Nailed it.  That's what happens when you throw rule of law out the window.  Nothing means anything after that.  It's just the strong preying on the weak after that.  Welcome to hell.

Fri, 04/19/2013 - 16:30 | 3473928 Urban Redneck
Urban Redneck's picture

With the caveat that, if they let one TBTF fail, they ALL will fail from the ensuing deposit flight.

Fri, 04/19/2013 - 16:09 | 3473796 kaiserhoff
kaiserhoff's picture

Disintermediation on steroids.

If you wanted to make banks not only useless, but dangerous, this is the way to do it...

But the same applies to all lawful and productive commerce.  Welcome to the big casino.

Fri, 04/19/2013 - 16:21 | 3473867 knukles
knukles's picture

Exacamundo, as you and I have already commiserated in earlier threads.
This is a bad sounding item to the general public.

Isn't my deposit guaranteed, still?

Must needs be publicly addressed by the FDIC to put the risk to rest or its off to the mattresses, especially when the yield on deposits is effectively 0

Fri, 04/19/2013 - 17:17 | 3474152 fonzannoon
fonzannoon's picture

Knukles isn't fdic 250k per person? If you have Mom and Dad JTWROS in trust for little jimmy and that not 1 mil in fdic coverage?

I don't know man. If a bank goes I just see Cyprus. and by that I mean everyone above fdic get's corzined and everyone within the limits has full blown capital controls and is told everything is fine but never sees that principal again. Just my 2 cents.

Fri, 04/19/2013 - 20:32 | 3475028 knukles
knukles's picture

Fonz... It's quite complex, actually.
For example, you can have the 250 k at each of a dozen different FDIC members so you're iInsured at each for a total of 1.5 mm...
Iras etc and joint accounts are counted separately, brand large but not as a blanket statement
INO, FBO etc, are other twists

Gotta research it per case to get comfortable
You must do the research yourself, the due diligence to make sure you're not in excess from numerous accounts

And BTW some years ago the FDIC website was an easier read than now...I find it terribly clumsy, but can get the info.

Fri, 04/19/2013 - 21:47 | 3475456 klockwerks
klockwerks's picture

Knuck, I read the other day that if that 250K is in the same name, no matter what the total, it only insures the 250K

Fri, 04/19/2013 - 23:30 | 3476025 Hulk
Hulk's picture

Yes indeed. I checked with my bank manager. $250k is an "umbrella" figure.

Go fish...

Sat, 04/20/2013 - 06:07 | 3476489 Caggge
Caggge's picture

Do you think when the shit hits the fan that the rules will mean anything anyways?

Sat, 04/20/2013 - 13:09 | 3477282 Marco
Marco's picture

To a certain extent yes ... TPTB will be out of dollar denominated assets any way by that time, they don't really care if the printing press takes care of the problem at that point. Which is thus what will happen, either the FDIC assets get shuffled to the FED for money or government simply runs a larger deficit.

Fri, 04/19/2013 - 16:10 | 3473803 Ham-bone
Ham-bone's picture

Are folks who put their money in the bank getting a "return"?  Regardless how minute the interest rate, that now makes them classifed as an "investor" and as such granny, your business acct, etc. are part of the capital structure.  This is exactly the differentiation that was used in Cyprus.

Fri, 04/19/2013 - 17:10 | 3474128 gwar5
gwar5's picture

Depositing your money in a bank is no longer considered an unsecured loan to the bank. They never obfuscate or lie.

Fri, 04/19/2013 - 17:12 | 3474131 gwar5
gwar5's picture

Depositing your money in a bank is no longer considered an unsecured loan to the bank. They never obfuscate or lie.

Fri, 04/19/2013 - 18:15 | 3474363 WillyGroper
WillyGroper's picture

>>>>>> "Regulating Large Financial Institutions" Stein made something very clear: if and when a TBTF fails, and since this time is not different, and a failure is only a matter of time, depositors will lose everything

Fri, 04/19/2013 - 19:26 | 3474718 Whiner
Whiner's picture

What makes you, Mr. Depositor, insured by FDIC, think your claim as a creditor of your bank is going to be elevated to other creditors like bond holders and a trillion or so derivative claimants? Oh, "you're insured anyway"? Well think about that in a systemic collapse. When will you get your money and what per cent. Why you think BoA dropped their big claims down from the holding company to the Bank? Get your operating capital out of them big banks and deploy to top rated smaller banks. When it happens, nobody is gonna move a dime and you will never even get a hint-other than this-that it is coming. Up yours Bernanke &Co.

Sat, 04/20/2013 - 12:46 | 3477215 Marco
Marco's picture

FDIC has full faith and credit, it is backed by the printing press ... the dollars you get might not be worth much, but FDIC guarantueed deposits you will get back.

Fri, 04/19/2013 - 15:52 | 3473664 fonzannoon
fonzannoon's picture

He did not stick his foot in his mouth. Seer is right. they are locking the exit doors

Fri, 04/19/2013 - 15:55 | 3473674 maskone909
maskone909's picture


fighter of the nightman

champion of the .... sun

your a master of karate and friendship

for everyone

Fri, 04/19/2013 - 15:55 | 3473678 AldoHux_IV
AldoHux_IV's picture

Well if it weren't for accounting gimmickery then these institutions would already be failed. How anybody keeps their "money" at these firms is beyond me, but then again what a lot of people do and say is beyond me.

Fri, 04/19/2013 - 15:56 | 3473690 SDRII
SDRII's picture

must be why equity is closing on the high and gold settling under 1400

Fri, 04/19/2013 - 16:11 | 3473816 SmallerGovNow2
SmallerGovNow2's picture

gold finished 1400 even.  everyone is green Friday, everyone go home, drink, and be merry for the weekend...  except if you live in BOSTON and are under house arrest...

Fri, 04/19/2013 - 16:20 | 3473869 Mordenkainen
Mordenkainen's picture

How easily they forego their 4th amendment rights. The impending subjugation of the citizenry will be a cake walk.

Fri, 04/19/2013 - 16:33 | 3473924 NotApplicable
NotApplicable's picture


Reminds me of my last jury "summons." Out of 50 people I was the only one who would not swear in advance to obey any arbitrary command the judge might give the jurors.

Oh well, I bet they don't ever invite me back. Ms. Judge wasn't too pleased at my lack of boot-licking worship.

Fri, 04/19/2013 - 16:48 | 3474010 HD
HD's picture

Is this in the US? They wanted you to swear before you were even selected a juror?

What did she do?

Sat, 04/20/2013 - 07:30 | 3476555 August
August's picture

I personally would swear whatever the assholes told me to swear...

... and then, as the case (e.g. against your local pot dealer, Mr. von Nothaus or whomever) progressed, have a truly anguishing change of heart that compels - yes compels! - you to judge both the facts and the law.  As is your right.

Sat, 04/20/2013 - 09:09 | 3476605 Winston Churchill
Winston Churchill's picture

Same here.Gave a spiel on the history of nullifcation, and all the potential

jurors who heard it were excused, along with myself.

Must be on some subversive  list, never had a summons for jury  duty again.

Fri, 04/19/2013 - 15:56 | 3473692 waterwitch
waterwitch's picture

Americans might be warned, but how many will actually have heard or seen the message?

(Not everyone sees ZH, for instance).

Fri, 04/19/2013 - 16:29 | 3473918 WTFx10
WTFx10's picture

Oh the main stream media will report on it over and over and over again. Just like the Gun control journalism that we have been bombarded with for fucking months.

Why do they want us unarmed again?

Think of the children, the ones running the country?

Sat, 04/20/2013 - 00:15 | 3476175 Blues Traveler
Blues Traveler's picture


Fri, 04/19/2013 - 15:55 | 3473693 Forgiven
Forgiven's picture

No, no, no.  Say it with more expression.  Like this.

"Do you want fries with that?"





That's the kind of job the Fed is good at 'creating.'

Fri, 04/19/2013 - 16:24 | 3473894 knukles
knukles's picture

Cheese and chili fries

And a 40 oz refillable soda.

Fri, 04/19/2013 - 18:39 | 3474494 sun tzu
sun tzu's picture

Except in NYC where 16oz is the maximum size or else you will be thrown in jail for drinking from an oversized cup

Fri, 04/19/2013 - 15:56 | 3473698 Agent P
Agent P's picture

Isn't that the way it's supposed to work (past the FDIC insured amount at least)?  Stock holders, then bond holders, then uninsured depositors?  What's wrong with this?

Fri, 04/19/2013 - 17:04 | 3474072 NoDebt
NoDebt's picture

Nothing is wrong with it.  But imagine you're a small-medium business that has to keep a mil or two in the kitty just to do payroll and buy inventory, etc.  If you need 2 mil running capital that's 8 banks to stay under the insured minimum. 

What happened in Cyprus is so much worse than just what happened to individuals.  They probably sank half their viable businesses in that fiasco, too.  They went into instant depression.  They didn't just take the wealth, they destroyed a significant part of the productive capacity to make more in the future.

It's like a planet-killer asteroid.  Doesn't matter where it hits.  If a bank like Citi went down it wouldn't matter what bank you had your money in- the whole planetary banking system would fail in a matter of days.

Hence the term "Too Big To Fail."

Fri, 04/19/2013 - 17:21 | 3474157 Agent P
Agent P's picture

No argument there.  And I don't think it would reach the depositors in reality.  The stock would get wiped, the bonds would get the #4 on the haircut chart, and the deposits and loans would be dealt out via the FDIC to a syndicate of other institutions to prevent the planet killer bank run...the derivative counterparty waterfall on the other hand would be the real doozy, which likely leads to nationalization (sorry, "put into conservatorship").  Still, I hate to think the only answer is TBTF can't be fixed because it's TBTF.

Fri, 04/19/2013 - 19:12 | 3474616 Real Estate Geek
Real Estate Geek's picture

I'm not so sure that any depositors would be spared. Nowhere in this speech or in the FDIC/BOE paper on G-SIFI's was there any mention of depositors; insured or not. But it was made clear that unsecured creditors would incur losses. And it's my understanding that depositors are a subset of unsecured creditors.

Fri, 04/19/2013 - 20:23 | 3474969 NoDebt
NoDebt's picture

I can tell you that if I was in charge the first thing I'd do is BREAK THOSE MOTHERFUCKERS UP.  Get rid of the most obvious aspect of them being "planet killers".  The other problem is that they all do the same fucking thing, so if you have one of them up to their eyeballs in derivatives you can bet all of them are (simply breaking them up does not fix this problem, it only takes the edge off the blade).  So you have to start leaning on them to unwind the derivatives soon after.  There's ways that can be done without the dreaded "new regulation" button being pushed.  Especially if each of the smaller banks holds less sway.

TBTF is a problem of having a bank basically hold you hostage by pointing a gun at it's own head.  If you take that "hostage tactic" away by making them smaller at the outset you get rid of a lot of their negotiating leverage.  Stop letting the tail wag the dog.

The crazy thing is most of those banks are worth more in pieces RIGHT NOW TODAY than they are as a whole.  Shareholders should be SUPPORTING this idea.  Like I say around here from time to time "where's Gordon Gekko when you need him?"

Sat, 04/20/2013 - 08:31 | 3476623 solidus
solidus's picture

Try this one on for size....I am a small business that typically uses a business line of credit.  In order to pay my bills to my suppliers for inventory I request a disbursement on my line of credit which the bank then credits to my checking account.  If we then get Cyprus'ed with this liability to the bank sitting in my account but before I pay my creditors, I'm thinking that the cash would disappear to the FDIC limit but that we would still owe the full balance to the bank and, oh yeah, I'd have no way to pay my suppliers.  Bullish!!

Sat, 04/20/2013 - 08:33 | 3476624 solidus
solidus's picture

Try this one on for size....I am a small business that typically uses a business line of credit.  In order to pay my bills to my suppliers for inventory I request a disbursement on my line of credit which the bank then credits to my checking account.  If we then get Cyprus'ed with this liability to the bank sitting in my account but before I pay my creditors, I'm thinking that the cash would disappear to the FDIC limit but that we would still owe the full balance to the bank and, oh yeah, I'd have no way to pay my suppliers.  Bullish!!

Fri, 04/19/2013 - 17:00 | 3474073 NoDebt
NoDebt's picture

Double post

Fri, 04/19/2013 - 15:57 | 3473706 Racer
Racer's picture

I am committed to following both the letter and the spirit of the law.

Pass me the sickbucket

And how about following stable as in NO inflation mandate?. That is the ONLY definition of stable.


Fri, 04/19/2013 - 16:09 | 3473793 nonclaim
nonclaim's picture

I am committed to following both the letter and the spin of the law.

Translated into reality...

Fri, 04/19/2013 - 15:58 | 3473716 Dr. Engali
Dr. Engali's picture

There are no accidents. The jig is up. If you're not out you're screwed.

Fri, 04/19/2013 - 16:04 | 3473756 Bearwagon
Bearwagon's picture


Fri, 04/19/2013 - 15:59 | 3473721 kushmere
kushmere's picture

When this happens again, either in the United States or Elsewhere in the world, it will be another catalyst to drive the price of Bitcoin.

Fri, 04/19/2013 - 16:00 | 3473730 The Master
The Master's picture

Translation:  Guh guh GOLD BITCHEZZZZZZZZ

Fri, 04/19/2013 - 16:03 | 3473761 venturen
venturen's picture

Where is the best place to keep my gold, wine cellar, mattress, or as a statue in the front yard?

Fri, 04/19/2013 - 16:09 | 3473802 toys for tits
toys for tits's picture

Around your neck.

The Mr. T look is coming back.

Fri, 04/19/2013 - 18:41 | 3474496 Parrotile
Parrotile's picture

Depending on the amount of phyzz you have "on hand", you might need to be built like Mr T! At current market centre rates ($1,406 per Troy Oz.), if you've got $50k in gold, that's a 1 kilo brick, which is quite a weight to have around the neck, 24/7!!

Fri, 04/19/2013 - 16:01 | 3473738 rubiconsolutions
rubiconsolutions's picture

Since when is a depositor an investor? If these clowns can view bank deposits as investments then we are all screwed. Oh hell, I just answered my own question.

Fri, 04/19/2013 - 16:12 | 3473819 debtor of last ...
debtor of last resort's picture

A depositor is not an investor. It's a speculator. And should be punished accordingly.

Fri, 04/19/2013 - 16:41 | 3473982 css1971
css1971's picture

Since 1811.

You've been investing all your money in banks but didn't know it? WTF?


Google "Carr vs Carr 1811"

Fri, 04/19/2013 - 17:08 | 3474117 silver surfer
silver surfer's picture

Carr vs Carr 1811


The Lord Chancellor Cottenham said the following in judgement

Money, when paid into a bank, ceases altogether to be the money of the principal; it is by then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into a banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.

That has been the subject of discussion in various cases, and that has been established to be the relative situation of banker and customer. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor.


Fri, 04/19/2013 - 19:56 | 3474853 css1971
css1971's picture

That's the one. Banking works the same way everywhere, why change a winning formula.

That being the case, why would you deposit money in a bank when the rate of interest is so poor? The risk/reward doesn't make sense.

Fri, 04/19/2013 - 17:05 | 3474098 gwar5
gwar5's picture

I'm only surprised they are kindly telling us before they wipe us out. The usual MO is to deny it right up to Friday 5 pm before a long weekend. Beware Memorial Day.

Fri, 04/19/2013 - 18:53 | 3474552 DosZap
DosZap's picture

Since when is a depositor an investor? If these clowns can view bank deposits as investments then we are all screwed. Oh hell, I just answered my own question


When you deposit your money in the bank your LOANING them the money.

That's how ALL will get Cypressed.

Fri, 04/19/2013 - 16:03 | 3473751 Yen Cross
Yen Cross's picture

     It feels like the world is headed towards one big 'TBTF-athon'. Everyone gets Corzined, and the C/Bs get to vaporize all the worthless paper they have printed and start over.

Fri, 04/19/2013 - 17:00 | 3474080 gwar5
gwar5's picture

UR right Yen. TBTF are so interconnected there will be few places to hide. Even a 'safe' bank that does overnight interbank loans will be caught up and the money snatched away. And Jim Willie said in an interview the other day Morgan Stanley is teetering and only weeks/months away from going down like Lehman. 

Fri, 04/19/2013 - 16:04 | 3473762 polo007
polo007's picture

Fed's Kocherlakota: Low rates may last 5-10 years

April 18, 2013

WASHINGTON (MarketWatch) - Financial market conditions requiring the Federal Reserve to keep rates unusually low may persist for the next five to 10 years, said Narayana Kocherlakota, the president of the Minneapolis Fed Bank on Thursday. This low-rate environment, and Fed policy, in turn, can be expected to "be associated with financial market phenomena that are seen as signifying instability," such as inflated asset prices, high asset return volatility and heightened merger activity, Kocherlakota said, in a speech at the Levy Economics Institute of Bard College. This instability is best addressed through effective supervision and regulation, Kocherlakota said. However, the Fed may have to confront the dilemma of whether to raise rates to reduce the risks of a financial crisis with the certainty that any tightening would lead to lower employment and prices, he said. The Fed is in a better position to address this challenge than it was in 2007, he said.

Fri, 04/19/2013 - 20:13 | 3474926 Abi Normal
Abi Normal's picture

So if I read this correctly:

The Fed is in a dilemma, or painted into a corner, yet...

"The Fed is in a better position to address this challenge than it was in 2007, he said."

These are the types of things that makes one go hmmmm

Tighten and up the instability, via higher unemployment, or loosen (keep it loose) and equity market volatility, if not outright crash,

Sounds me it is a lose lose situation, no? None of this is making sense???

Fri, 04/19/2013 - 16:03 | 3473764 SillySalesmanQu...
SillySalesmanQuestion's picture

You've been Cypzined... Or maybe Corprused

Fri, 04/19/2013 - 16:15 | 3473769 venturen
venturen's picture

They take my money...I am going to exerciser my 2nd amendment right! 

Fri, 04/19/2013 - 16:04 | 3473773 Canadian Dirtlump
Canadian Dirtlump's picture

Following the letter and spirit of the law, unless it involves one of your devil worshipping, gay sex loving, paedophile party going to, drug sucking uniformly evil boyfriends

Fri, 04/19/2013 - 16:08 | 3473786 ParkAveFlasher
ParkAveFlasher's picture

That last picture ... I used to bullseye womprats in my t16 in Beggar's Canyon back home, they aren't that much bigger!!!!

Fri, 04/19/2013 - 16:09 | 3473795 Joe Davola
Joe Davola's picture

OK it says 'an individually failing', what if there are several at once?

Fri, 04/19/2013 - 16:09 | 3473799 Bunga Bunga
Bunga Bunga's picture

So Governor Stein finally admits, that the TBTF banks are walking deads?

Fri, 04/19/2013 - 16:09 | 3473808 debtor of last ...
debtor of last resort's picture

I think even the Black Swans are rehypothicated in this statement.

Fri, 04/19/2013 - 16:11 | 3473811 jmcadg
jmcadg's picture

This will be a worldwide bank confiscation:

Be your own central bank.

Fri, 04/19/2013 - 16:12 | 3473815 astoriajoe
astoriajoe's picture

"even if this leads to an outcome that is messier and more costly to society than we would ideally like."

so how messy is the ideal level of messy? Just checkin'

Fri, 04/19/2013 - 16:27 | 3473910 knukles
knukles's picture

There was this Dirty Sue I knew in college and let me tell you about messy...

Fri, 04/19/2013 - 16:11 | 3473818 SheepDog-One
SheepDog-One's picture

If by now people still trust the TBTF banks then they deserve the kornholing they'll get one of these mornings and I dont feel sorry for them at all. 

Fri, 04/19/2013 - 16:16 | 3473847 sosoome
sosoome's picture

It sounds like Stein is giving us fair warning.

Fri, 04/19/2013 - 16:35 | 3473950 NotApplicable
NotApplicable's picture

What about small businesses though? Not a lot of options for them.

Fri, 04/19/2013 - 19:22 | 3474696 Parrotile
Parrotile's picture

Not just Small Businesses, rather everyone who is paid by Direct Credit Transfer - and the majority (99%++) are paid this way, for "security reasons", and because it's very convenient for the Employer (especially if they rule over a large workforce), the Revenue Services, and of course the Banking Institutions.

Even with the "system" running "smoothly" it takes THREE working days to clear deposits (so much for instantaneous Interbank Transfers!), and I no longer keep count of the times we've ALL had e-mails from Payroll "apologising for delays in payment processing" - delays that are measured in days, not hours . . . . . .

Elect to be paid in cash? Won't do it, cause they can't do it. Applies to ALL State Health Services, and all Governmental Services (military, Police, Fire, Ambulance, Education, Soc. Services , etc., etc.)

Fri, 04/19/2013 - 16:14 | 3473830 MassOpiate
MassOpiate's picture

How are they gonna cyprus me?  I leveraged myself upto the hilt . . .


Of course you can bet they won't let debtors get off scot free. . .

Fri, 04/19/2013 - 16:16 | 3473834 sosoome
sosoome's picture

Spot on.

Investors and depositors should be the ones to lose, not the tax payers.

Apply that principle and excessive risk will stop pronto.

Fri, 04/19/2013 - 19:29 | 3474736 Parrotile
Parrotile's picture

The "Excessive Risk" horse has long left the stable.

What happens when it is decided that there is no difference between holdings in a deposit account, and a current account?

What happens when the wages in those current accounts disappear, for all those invisible "Service Providers" your comfortable standard of life depends on?

If you think they'll "carry on regardless" you've got a surprise coming - and remember Sod's Law - disasters always seem to happen at the most inappropriate time.

EVERYONE better hope the "system" continues, 'cause if it doesn't, things will become "very interesting" VERY quickly.

Fri, 04/19/2013 - 20:20 | 3474957 Abi Normal
Abi Normal's picture

I suspect we are further down the rabbit hole than we think!

Fri, 04/19/2013 - 16:16 | 3473841 Smuckers
Smuckers's picture

Oh I see.....NOW they follow Dodd-Frank.

Fri, 04/19/2013 - 16:18 | 3473855 polo007
polo007's picture

The Secret World Of Gold Part 1

The Secret World Of Gold Part 2

The Secret World Of Gold Part 3

Fri, 04/19/2013 - 16:21 | 3473871 Smuckers
Smuckers's picture

Try as he might - Bart will never pull off a Rutger Hauer.

Fri, 04/19/2013 - 16:20 | 3473872 vulcanraven
vulcanraven's picture

Thank you for posting this!

Fri, 04/19/2013 - 16:26 | 3473897 Bingfa
Bingfa's picture

Thank You....+1000

Fri, 04/19/2013 - 17:22 | 3474171 Silberadler
Silberadler's picture

Awewsome !

Thanks for the links - tried the whole tie to access the CBC website but was blocked.

IP hiding did not help either.

Looks like an intersting documentary.


Wonder when it gest taken down...


Fri, 04/19/2013 - 17:26 | 3474183 fijisailor
fijisailor's picture

When I started watching part 1, part 2 and 3 were available.  After watching part 2, Part 3 has been deleted; the part pointing directly at the big banks.  Anyone know where part 3 is?

Fri, 04/19/2013 - 18:13 | 3474380 Bingfa
Fri, 04/19/2013 - 16:21 | 3473875 RSDallas
RSDallas's picture


Fri, 04/19/2013 - 16:23 | 3473881 Kirk2NCC1701
Kirk2NCC1701's picture

Oh fuck!  THIS. IS. THE. BIG. ONE.  10.0 on the Richter scale.  Where's my latest Phyz, PM shop!?

Fri, 04/19/2013 - 16:26 | 3473890 buzzsaw99
buzzsaw99's picture

...depositors will lose everything, which now that Cyprus is the template, is to be expected.


Bullshit! frank/dodd is talking about stock and bond holders not depositors under the fdic limit. cyprus isn't a pattern for anything here. this piece is shameless fear mongering.

Fri, 04/19/2013 - 16:33 | 3473933 knukles
knukles's picture


Fri, 04/19/2013 - 16:34 | 3473941 andrewp111
andrewp111's picture

Uninsured depositors will take losses. That is nothing new. What is different is uninsured depositors in large TBTF banks will take losses.

Fri, 04/19/2013 - 16:57 | 3474050 buzzsaw99
buzzsaw99's picture

the fed doesn't make those decisions, the fdic does. all the fed does is buy crap assets off the tbtf so dimon, blankfein, et al, can get their bonuses. this fed fuckface is full of shit.

Fri, 04/19/2013 - 20:24 | 3474981 Abi Normal
Abi Normal's picture

Does it really matter if there is systemic failure, everyone loses in the end!

Fri, 04/19/2013 - 16:26 | 3473909 Dr. No
Dr. No's picture

Thank you Captain Obvious.

Why would it be a surprise if you placed your money in the protection of someone else, there is a chance you will not get it back?


America has gone soft.

Fri, 04/19/2013 - 17:00 | 3474022 They Tried to S...
They Tried to Steal My Gold's picture





A Deposit in this bank is considered an investment in this bank. This bank operates under the fractional banking system. This mean that this bank will use your investment to lend to others as well as engage in trading for the bank's profitablilty. This bank will lend at a ratio of  9 to 10 times the total amount of the deposits. 


Because of this 9 to 10 times lending ratio your investment can be at risk. You could lose some or all of your money should the bank's lending to others not perform as expected. Additionally this bank also engages in derivative trading and synthetic investments. Both of these types of trading is considered high risk. This bank also lends to commercial developers that are subject to periods of under performance. 


You can deposit or make unlimited investments in this bank. However, if you elect to withdraw any amounts over $10,000 per withdrawal, the bank is required to notify the IRS and the US governent. In addition, any requests to withdraw more than $10,000 at one time may take up to a week to return your investment back to you. We recommend to call in advance or make an appointment to get your investment returned.


The FDIC has funds on average of 1-2%  for all total US Federal Banks depositors investments. This coverage is designed to cover $250,000 per investor's individual checking and saving accounts. Any accounts that have in excess of $250,000 are not covered by the FDIC.


At this time there are no rememedies available in addition to the FDIC.

This Bank:

This bank is not liable for any failures of the FDIC. Should the FDIC file for bankruptcy, this bank is not liable. It is possible that the FDIC, if one or more banks file for bankruptcy at the same time or closely in time, that the FDIC could run out of funds for account coverage.  


We advise all depositers to seek and consult legal counsel prior to making investments with this bank. 


I have read this disclosure on my Investment deposit and have elected to make an investment in this bank.



     Bank Investor




Fri, 04/19/2013 - 17:09 | 3474116 Kirk2NCC1701
Kirk2NCC1701's picture

+250,000.  Bravo!

Should be copy/pasted in mass-emails to all family & friends... like one of those "If you don't forward me to 5 or more people, bad luck will follow you".

Fri, 04/19/2013 - 17:45 | 3474259 BTFDemocracy
BTFDemocracy's picture

I'm gonna add this to if that's OK :)



Fri, 04/19/2013 - 18:16 | 3474394 Radical Marijuana
Radical Marijuana's picture

Good comment They Tried to S!

An excellent "Disclosure."

Of course, the whole system is based on FRAUD, which requires the basic facts NOT to be disclosed to people. It depends upon the vast majority of people continuing to be so completely clueless that they do not have a clue how clueless they are.

For those with a macabre sense of humour, it is amusing to try to tell mainstream morons that the banks make money out of nothing, except the borrowers' promise to repay that money made out nothing, with interest, that has not yet been made out of nothing, to be able to repay the money that was made out of nothing in order to loan in the first place.

The whole system depends upon the majority of people not understanding how the monetary systems works, and not wanting to understand! It is the result of the prolonged triumph of lies, backed by violence, whereby people have learned that it is better to continue to be ignorant and apathetic, since there are no practical alternatives but to still be forced to participate in that monetary and taxation system.

People who wake up to how screwed they are then tend to not be able to do anything to change those fundamental social facts, although they may do some personal things to prevent themselves being as screwed as they otherwise would be, if they had continued to be completely ignorant.

Fri, 04/19/2013 - 21:37 | 3475391 Tijuana Donkey Show
Tijuana Donkey Show's picture

You forgot "Any asshat GOVT agency that thinks you owe them money can sack your deposits at any time, without warning."

Fri, 04/19/2013 - 16:50 | 3474023 polo007
Fri, 04/19/2013 - 16:50 | 3474024 gwar5
gwar5's picture



Jim Sinclair has upped his ante way up on price of gold. Between Stein's statement, the recent failure of the paper market in gold, and the global run on physical gold, Sinclair now says gold is going to $50,000.  Sinclair is usually spot on. Failure of SIFIs, (bail-ins) and failure of paper gold market will make this inevitable.

Even if he is 100% wrong, gold only goes to $25,000. I rather doubt gold will go to $700.

$50K?? I gotta get my head around that one. But it does look like things are moving towards Rickards' Option #3 outcome of currency wars, which is a disorderly (chaos) resolution.  Rickards had said recently $44,000/oz is what it would take at current levels to balance the money supply, so the numbers are not random.



Sat, 04/20/2013 - 02:12 | 3476333 SHRAGS
SHRAGS's picture


$50K?? I gotta get my head around that one.

It wouldn't have been if you had been reading FOFOA - he has been predicting this  pricing since at least 2009, for Phyzz only, not paper. 

Fri, 04/19/2013 - 16:55 | 3474043 css1971
css1971's picture

Seriously? Here? I thought everyone knew this?

It's been this way for at least 200 years, WTF do you think there are runs on banks?


Fri, 04/19/2013 - 16:57 | 3474053 JR
JR's picture

What I say regarding Jeremy: Pull him out of there. Let’s get together and pull him out.  You can’t have crooks taking private property and calling it “law.”

It’s time to exercise the real law: we earned this money and it belongs to us and no matter what kind of fancy words you use, you ain't gonna get it without a fight.

Times are a lot different from the old days when a legitimate bank failed; today these thieves already are saying they are going to take depositors' property. When a bank does something bad and falls, it’s one thing, but this is stealing. And Frank and Dodd and Ben knew it when they buried this little bomb.

The Fed is busy trying to put revival lipstick on a dead pig. All this mumble jumble is just a way to keep the public from the realization that QE is nothing more than complex theft, and that the Fed is on the verge of a currency failure.

Before the death sentence of a currency failure is imposed on America, Americans must take back their legitimate control of the currency by abolishing the Fed and its elite few of whom they no longer have any control; and if the Congress won't do it, the people must rectify the situation through revolutionary means.

Fri, 04/19/2013 - 16:58 | 3474055 leftcoastfool
leftcoastfool's picture

"Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution."


Someone should have told this to Hank Paulson that Sunday night in 2008 when he bailed-out Goldman-Sucks by giving them bank holding company status, allowing them to borrow from the Fed...

Fri, 04/19/2013 - 17:06 | 3474095 yogibear
yogibear's picture

Fair warning when they do fail and swipe funds from accounts.

Corzine paved the way with MF Global and investment firms.

Fri, 04/19/2013 - 17:27 | 3474186 GreatUncle
GreatUncle's picture

What Cyprus has shown and the article, just take any money you have in a bank out.

It really is that simple and if you can't buy gold or silver put it under the mattress.

So you get a 10% estimated return over the next 2 years? Whoopdedoo only to find you then take a 20% haircut in some form or other.

This is the current nature of economies everywhere.


Fri, 04/19/2013 - 17:31 | 3474209 Godisanhftbot
Godisanhftbot's picture

 That why I say, even if they go to 1 cent, please, put all your money in Bitcoins.

Fri, 04/19/2013 - 17:34 | 3474225 malek
malek's picture

 I am committed to following both the letter and the spirit of the law.

He forgot to state which law - I'm sure he'll find one that allows him to do the exact opposite, if needed

Fri, 04/19/2013 - 17:53 | 3474290 neutrinoman
neutrinoman's picture

The US unlimited guarantee of deposits ended with the S&L crisis of 20+ years ago. There's never been any guarantee on brokerage accounts, etc.

The handwriting has been on the wall for 20 years: the TBTF banks are big, unstable, and bloated monstrosities. If you have money on deposit with them, take it out.

We got these monsters because, in the 1990s, we were told that such big institutions were needed to compete with the "universal banking" model in Europe and Asia. You can see where that got Europe and Asia. And look where it's gotten us. They were also the object of lavish subsidies by the Fed, and needed as well as places to park all those CDOs, CLOs, etc., from subprime mortgage lending -- local banks weren't allowed to touch that stuff, for the most part.

The homegrown Glass-Steagall model is far superior. But for now, put your money elsewhere, in some nice regional or local bank. And keep an eye on it. We have to go back to what our grandparents and great-grandparents knew about this issue and stop assuming Uncle Sugar Daddy's going to bail everyone out. Trust but verify.

Fri, 04/19/2013 - 19:02 | 3474579 WillyGroper
WillyGroper's picture

>>>>>There's never been any guarantee on brokerage accounts, etc.

SIPC - $500K of which they will only insure up to $250K Cash. The balance in equities.

Fri, 04/19/2013 - 17:56 | 3474313 SKY85hawk
SKY85hawk's picture

This may have been said further down, I didn't read all the comments.  I do think it's worth repeating;


The worst part is that derivative exposure is senior to depositors, so if B of A or Chase or any bank goes under, she says, "In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders."

Anyone with an account in a bank that has derivative exposure is asking for trouble.

Can anyone say, with real certainty, that their account will be covered before this kicks in?

Fri, 04/19/2013 - 18:13 | 3474371 Bingfa
Bingfa's picture

Yes, changed back in Bush's 2nd term.....

Fri, 04/19/2013 - 18:45 | 3474482 Radical Marijuana
Radical Marijuana's picture

I REPEAT this comment regarding Canada:

The following can be found on pages 144 to 145 (within the document, 154-155 in the pdf) of Jobs Growth and Long Term Prosperity – Economic Action Plan 2013 as tabled in the House of Commons by the Hon. James Flaherty, Minister of Finance on March 21, 2013.

This was otherwise known as the "budget," but that no longer looks anything like what a "budget" was supposed to be. Rather, it is 400 plus pages of propaganda.

The Government proposes to implement a bail-in regime for systemically important banks.
This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. ...

Does it make the stakeholders feel any better that they will be consulted on how best to implement that kind of bail-in regime? (I dislike that euphemistic phrase "stakeholders," as another example of professional liars speaking sideways.)

Of course, it is only a question of time until some aspect of the multihundred trillion dollar derivative bomb goes BOOM ... The main way that the ruling classes have anticipated that happening was to prepare to impose democidal martial law upon the "stakeholders" who get so seriously screwed ... That is probably why there has been such a steady stream of more false flag murders taking place inside America.

The runaway triumphs of the criminal banksters controlling our civilization is headed towards collapsing into chaos, which will probably trigger more mass murders. The worst thing about that appears to be that those banksters already know all that, as well as anyone else, and expect it to work through, to become even better for them in the longer term!

The economy is being deliberately destroyed, through an inside job, while almost all of the terror events that I have examined turned out to also be inside jobs, that were the main ways that the ruling classes are preparing for the consequences of them deliberately destroying the economic systems, since they expect to be able to go through that, and consolidate their power and control even more so, on the other side ...

I expect that to manifest much more extremely within the USA than anywhere else! I believe that less than 10% of Americans understand what is being prepared, which can be read between the lines of this statement from a central bankster.

Sat, 04/20/2013 - 06:45 | 3476515 sudzee
sudzee's picture

"Certain liabilities" . What is this to mean?

Canada savings bonds

Does "certain liabilities" infer all of the above?

Seems to me that that the banks want real estate.
In the US is this just legalization of MERS II. Can't steal ownership of property legally so we'll do it by FED edict.

Banks are starved for real assets and RE is the ticket to kick the can down the road a little further.

Fri, 04/19/2013 - 18:42 | 3474508 Son of Loki
Son of Loki's picture

You're only depositors...not bankers.....


You don't count. You're expendable.

Fri, 04/19/2013 - 19:13 | 3474633 FranSix
FranSix's picture

What he means to say is that a TBTF which is technically bankrupt can access their client's assets so that they can open the next business day.

Do NOT follow this link or you will be banned from the site!