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The War on Cash: Your Deposit at the Bank Can be Converted to Equity If a Crisis Hits
As we noted last week, one of the biggest problems for the Central Banks is actual physical cash.
The financial system is predominantly comprised of digital money. Actual physical Dollars bills and coins only amount to $1.36 trillion. This is only a little over 10% of the $10 trillion sitting in bank accounts. And it’s a tiny fraction of the $20 trillion in stocks, $38 trillion in bonds and $58 trillion in credit instruments floating around the system.
Suffice to say, if a significant percentage of people ever actually moved their money into physical cash, it could very quickly become a systemic problem.
Indeed, this is precisely what caused the 2008 meltdown, when nearly 24% of the assets in Money Market funds were liquidated in the course of four weeks. The ensuing liquidity crush nearly imploded the system.
Because of this, Central Banks and the regulators have declared a War on Cash in an effort to stop people trying to get their money out of the system.
One policy they are considering is to put a carry tax on physical cash meaning that your Dollar bills would gradually depreciate once they were taken out of the bank. Another idea is to do away with actual physical cash completely.
Perhaps the most concerning is the fact that should a “systemically important” financial entity go bust, any deposits above $250,000 located therein could be converted to equity… at which point if the company’s shares, your wealth evaporates.
Indeed, the FDIC published a paper proposing precisely this back in December 2012. Below are some excerpts worth your attention:
This paper focuses on the application of “top-down” resolution strategies that involve a single resolution authority applying its powers to the top of a financial group, that is, at the parent company level. The paper discusses how such a top-down strategy could be implemented for a U.S. or a U.K. financial group in a cross-border context…
These strategies have been designed to enable large and complex cross- border firms to be resolved without threatening financial stability and without putting public funds at risk…
An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. …
…Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.
http://www.fdic.gov/about/srac/2012/gsifi.pdf
In other words… any liability at the bank is in danger of being written-down should the bank fail. And guess what? Deposits are considered liabilities according to US Banking Law. In this legal framework, depositors are creditors.
So… if a large bank fails in the US, your deposits at this bank would either be “written-down” (read: disappear) or converted into equity or stock shares in the company. And once they are converted to equity you are a shareholder not a depositor… so you are no longer insured by the FDIC.
So if the bank then fails (meaning its shares fall)… so does your deposit.
Let’s run through this.
Let’s say ABC bank fails in the US. ABC bank is too big for the FDIC to make hold. So…
1) The FDIC takes over the bank.
2) The bank’s managers are forced out.
3) The bank’s debts and liabilities are converted into equity or the bank’s stock. And yes, your deposits are considered a “liability” for the bank.
4) Whatever happens to the bank’s stock, affects your wealth. If the bank’s stock falls at this point because everyone has figured out the bank is in major trouble… your wealth falls too.
This is precisely what has happened in Spain during the 2012 banking crisis over there. And it is perfectly legal in the US courtesy of a clause in the Dodd-Frank bill.
This is just the start of a much larger strategy of declaring War on Cash. The goal is to stop people from being able to move their money into physical cash and to keep their wealth in the financial system at all costs.
Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.
We detail this paper and outline three investment strategies you can implement
right now to protect your capital from the Fed's sinister plan in our Special Report
Survive the Fed's War on Cash.
We are making 1,000 copies available for FREE the general public.
To pick up yours, swing by….
http://www.phoenixcapitalmarketing.com/cash.html
Best Regards
Phoenix Capital Research
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So the real problem here is that the banks are truly insolvent, all due to FED-inspired irresponsible lending, and this has grown so systemic that the FDIC cannot hope to cover the deposits, should reality ever come back into play. Hmmmm. That IS a problem. Time to buy some RE in Slobovia?
War on Cash as reported here in early May...
http://www.globaldeflationnews.com/governments-are-secretly-preparing-to...
Which bank does Apple keep its billions in?
I have a better question: does the author of this Pheonix Capital stuff know what PROOFREADING is!!!??
Likely the vault they're building beneath the Mothership in Cupertino...
And god knows how many instutions off US soil and out of the system's confiscation abilities.
As for me, I keep my use of the banking system to an absolute minimum - but I don't have millions to lose.
That is why if I need to use banking, I use credit unions. If the banking system crashes the majority of credit unions won't be taken out with them since they are outside the FDIC system and aren't eligible to be used for bail ins since Credit Unions and Community Banks are not FDIC insured or systemically important to qualify for regulation under Section 716 of Dodd Frankenstein anyways. If the USD itself blows up the banks are all equally screwed no matter what and in that case the credit unions are more self contained and if managed responsibly will have enough tangible collateral on hand anyways to keep functioning on a small scale.
Besides they lie about needing bail ins to cover derivatives gone bad anyways.
http://www.dodd-frank-act.us/Dodd_Frank_Act_Text_Section_716.html
...
B) INSTITUTIONS THAT POSE A SYSTEMIC RISK AND ARE SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REGULATED UNDER SECTION 113.
—All swaps entities that are institutions that pose a systemic risk and are subject to heightened prudential supervision as regulated under section 113, that are put into receivership or declared insolvent as a result of swap or security-based swap activity of the swaps entities shall be subject to the termination or transfer of that swap or security-based swap activity in accordance with applicable law prescribing the treatment of those contracts.
No taxpayer funds shall be used to prevent the receivership of any swap entity resulting from swap or security-based swap activity of the swaps entity.
(C) NON-FDIC INSURED, NON-SYSTEMICALLY SIGNIFICANT INSTITUTIONS NOT SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REGULATED UNDER SECTION 113.
—No taxpayer resources shall be used for the orderly liquidation of any swaps entities that are non-FDIC insured, nonsystemically significant institutions not subject to heightened prudential supervision as regulated under section 113
...
They are just going to cancel the trades and reset the balance sheets without any assets trading hands!
and not only that they give them up to 2 years to untangle the mess, more than enough time to reset all periphery trades connected at the same time.
...
(f) TRANSITION PERIOD.—To the extent an insured depository institution qualifies as a ‘‘swaps entity’’ and would be subject to the Federal assistance prohibition in subsection (a), the appropriate Federal banking agency, after consulting with and considering the views of the Commodity Futures Trading Commission or the Securities Exchange Commission, as appropriate, shall permit the insured depository institution up to 24 months to divest the swaps entity or cease the activities that require registration as a swaps entity.
In establishing the appropriate transition period to effect such divestiture or cessation of activities, which may include making the swaps entity an affiliate of the insured depository institution, the appropriate Federal banking agency shall take into account and make written findings regarding the potential impact of such divestiture or cessation of activities on the insured depository institution’s (1) mortgage lending, (2) small business lending, (3) job creation, and (4) capital formation versus the potential negative impact on insured depositors and the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.
The appropriate Federal banking agency may consider such other factors as may be appropriate.
The appropriate Federal banking agency may place such conditions on the insured depository institution’s divestiture or ceasing of activities of the swaps entity as it deems necessary and appropriate.
The transition period under this subsection may be extended by the appropriate Federal banking agency, after consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, for a period of up to 1 additional year.
...
Bail ins are backdoor recapitalization theft schemes for the banks in the FDIC system (which credit unions and community banks aren't, they are chartered differently).
Credit Unions and Community banks are regulated under section 113 exclusively as nonsystemically important
Slight clarification Credit Unions are regulated under section 716 here is the text
...
(C) NON-FDIC INSURED, NON-SYSTEMICALLY SIGNIFICANT INSTITUTIONS NOT SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REGULATED UNDER SECTION 113.
—No taxpayer resources shall be used for the orderly liquidation of any swaps entities that are non-FDIC insured, nonsystemically significant institutions not subject to heightened prudential supervision as regulated under section 113.
(2) RECOVERY OF FUNDS.—All funds expended on the termination or transfer of the swap or security-based swap activity of the swaps entity shall be recovered in accordance with applicable law from the disposition of assets of such swap entity or through assessments, including on the financial sector as provided under applicable law.
(3) NO LOSSES TO TAXPAYERS.—Taxpayers shall bear no losses from the exercise of any authority under this title.
...
It states what already was that the credit unions are separate from TBTF are under FDIC insurance jurisdiction, unless they are systemically important. All Dodd Frank clarifies is if a credit union does go tits up, no taxpayer bailout, deposit insurance only to cover loses which is a separate fund from FDIC.
Some recommended reading.
http://www.thestreet.com/story/11246068/1/are-credit-unions-fdic-insured...
http://www.creditunions.com/articles/what-the-bailout-means-for-credit-u...
http://gao.gov/assets/650/648210.pdf
Credit Unions are all around the better option, even for investing in this particular climate right now. Smaller investments spread out among many credit unions (which most you can do shared banking through a co-op network) is a safer and more prudent way of not keeping all your eggs in one basket since they are more resistant to the domino effect if one bigger bank goes in the FDIC system right now.
You have access to feeless atm's all over the US and in some countries outside the US once you have an account in a participating credit union, can't say the same for Chase or any other major FDIC bank. That is customer convenience without parasitic fee sucking.
https://co-opcreditunions.org/locator/?ref=co-opsharedbranch.org&sc=1
you're confusing a run on the bank with cash withdrawals. if ABC fails the FDIC moves your electronic deposits to another bank. GOLDMAN has FDIC, and they don't have a retail branch. there are plans to pay you in kind for deposits, to time date money, all this was written about by Bob Prechter years ago. whether all or any of it becomes policy remains. suffice it to say they can do it. the MM crash in 2008 was in non US treasury MMs. the MMs had moved into more risky investments, (gee why they do that ben bernanke?) and could not meet their NAV when investments collapsed. ergo there is a now a reverse REPO program for MMs. in the capital of crony capitalism, Japan, the BOj actually parks money in MM accounts, and then regularly sweeps it up when it isnt needed.
Always an interesting twist on reality when it comes to the banksters' grift.
The banksters steal our deposits, steal more from our country via counterfeit, and then have the gall to say, "We just gave you some equity in our criminal and bankrupt theft and fencing operation. Isn't that nice of us?"
Well, all banksters have equity in my guillotine operation.
Liberty is a demand. Tyranny is submission..
Guillotine the Fed. Audit the heads.
They are neve going to bother with regular bank deposits. Anything covered by FDIC is irrelevant.
The mother lode they have always had their sights on is baby boomers' 401Ks and IRAs. For most people, that means the lame-assed mutual funds you are allowed to chose between.
The scam they use to save the financial system in the U.S. - when the time comes - will involve stealing part of and restricting withdrawals from your retirement accounts. Some blue-collar workers have a million bucks in 401Ks. The government only needs to confiscate the equity and replace it with IOUs OTHER than FRNs. There is no escape. Registering the account as an IRA or 401K means the government has a long-standing track record of every retirement account in the country. If you try to drain that quickly, you'll be branded a terrorist. They will hold you hostage with that money as long as they want, and still screw you in the end when they're desperate.
U.S. baby boomers are in for an ass-raping of a lifetime - it will be epic. How do I know? Because it's the only money they have left to steal that doesn't belong to another oligarch.
I think you summed it up pretty well.
AND your precious metals will be confiscated - AS THEY WERE UNDER THE ROOSEVELT REGIME - or taxed and fined
GET IT THROUGH YOUR THICK HEADS - THERE IS NO ESCAPE FROM THE POWERS OF THE REGIME - IF YOU WANT FREEDOM AND LIBERTY, THEN YOU MUST FIGHT FOR THEM !
Actually very little was confiscated. The people in general believed FDR but very few of them gave up their gold.....
So when all our accounts are blown-out, who will you exact revenge on?
I’m taking it out on the henchmen and henchwomen at the specific location where I opened my account.
Really ?? Seems like a mighty low bar you have there. Not me. I'm aiming for the stars !!!!!
Good luck.
I'll work my way up. You work your way down. Let the gods sort them all.
Problem is, those henchmen and henchwomen are just as in the dark regarding how banking works as your average street wanker.
250,000, huh? Well, I shouldn't have any problem keeping my accounts below that...
And seriously, if I DID have 250,000 in a bank, it probably SHOULD be taken away from me. For my own good, as I would obviously be too stupid to be trusted with that kind of money.
You think they would stop at $250k?
The IMF has already tabled a proposal allowing banks to have their way with lesser accounts that are insured. They are recommending a one time wealth tax on accounts. Because it will be considered a tax there is no need for gov't sponsored insurance to pay out.
Funny there is no mention of that in this story.
Just saw a news story last night on how "filthy" paper money is. They swabbed some bills and inoculated Petrie dishes - and lo and behold - bacteria actually grew on the plates! Eeeeeew! Don't touch it - it's Eeeeeevil.
Of course nobody mentioned that this would be the exact result if you swabbed just about any surface on Earth excepting maybe a Hospital OR (we hope).
Nope - the big news was that paper money is dangerous to your health. The push is on.