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Could the FDIC Seize Bank Deposits During a Crisis?
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. Since then it’s also happened in Cyprus, Greece…and it is now 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 cost.
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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Not true. In Spain THAT didnt happen in 2012. In the future, who knows? But in Spain deposits remained untouched in 2012, everyone kept their deposits 100% in Bankia and all the rest of smaller bank failures. I am shocked by the article's lack of respect to real facts, makes me worry, because I usually agree partialy with their macro analysis. Maybe I should rethink it all... I write from Spain, btw.
Sounds like a good reason to buy physical gold.
Dear PCR, this is SO old news, I almost fell asleep. Any digital money in the system is "gamble money" that you should be willing to lose if SHTF. Bank accounts, bonds, shares, futures, options, you name it, it's all digital fiction until you convert it into either hard cash and/or PMs all out of the system. When it all comes down everybody will wish they had, but until then, the paper roaches will look like the smartest guys in the room.
Why would the FDIC want to seize deposit accounts, they're not real, there's nothing to seize, they are only ledger account entries denoting how much money the bank owes to the depositor.
Until you withdraw the cash which everyone should do.
"We are making 1,000 copies available for FREE the general public."
Complete with spelling errors and everything
This item begins by stating that the FDIC insures deposits up to $250,000, and then immediately forgets that it said that and proceeds to talk about all deposits as though all are at risk of being converted into stock.
I noticed the same thing about the $250,000 limit, and I would add that those deposits should be at risk. Why should I as a taxpayer bail out uninsured deposits, any more than I should bail out any other lazy fool who puts their money at risk? Come on right-wing Phoenix Capital, no reason to only hate the welfare queens who are poor...
I don't understand the premise: Digital dollars are different than physical dollars.
Aren't they both spendable?
Does the amount they are printed our of thin air dependent on whether they are physical?
If they are really concerned about people hording physical over digital, create a few trillion dollar coins and poof, done.
"Could the FDIC Seize Bank Deposits During a Crisis?"
Is that a question or a joke?!
Zion is a scheme, not an ethnicity..
"'Surely you can't be serious?!' 'Don't call me Shirley.'"
No, the FDIC will not steal accounts. The banks will. The law was changed last year so banks and financial corporations own every penny deposited in them, and depositors are now the lowest level on the creditor totem pole.
So the money will be long gone before the FDIC even starts thinking about what to do. Count on it.
Just pulled another $300 cash out of my local bank today. Wondering if I should be doing the same with my credit union accounts. I kinda like cash in the safe.
Does anyone know specifically how the new laws affect credit union accounts?
I just moved cash into a credit union because they are owned by "members" and do not function like for-profit banks that belong to "shareholders."
Credit unions are NOT insured by FDIC but by NCUA. http://www.ncua.gov/
It's an important question if you're sitting on cash.
One possible issue I found is that some credit unions may rely on big banks for some of their wealth storage and transfer. So even if the credit union itself was "safe," the haircut... I mean "bail in"... could happen at a higher level.
Technically, a credit union does not accept "demand deposits" and can, at any time, require advance notice of withdrawals. That is why, when a credit union offers checking accounts, it can only do so by clearing them through a commercial bank. (Look at your checks to confirm.) In any case, small banks, savings banks, savings and loan associations and credit unions are safer in a crisis because they will not be caught up in the big banks' interlocking speculative debts. But they are less liquid and you may have to wait to withdraw your money. The NCUA is a governmental entity administered by the Dept. of Labor.
Thank you RMolineaux. But do you know about the savings accts in credit unions?
Internally there is no limit to fund transfers between "checking" and "savings" accts. The checking accts are preceeded by additional numbers.
Using the ACH system there is no cost to transfer to external accts but the limits on mine are:
1-day total limit of $10,000.00.
30-day total limit of $30,000.00
But using wire transfer or check no limits.
Also I'm trying to understand NCUA "guarantees" compared to those of FDIC.
A bank run does not spare any particular class of banks. Even if your rmoney is technically "safe" in your local CU, the government will be swift to impose an all-inclusive bank holiday. On the day when you will most need your funds, they will not be accessible if they are sitting in any financial institution anywhere.
Also, remember that many "safe deposit" boxes in the Great Depression were impounded until the 1970s and many of the most valuable contents mysteriously disappeared in the interval.
When the world is in the grip of a universal fear and madness, who do you want holding your wallet?
Only you.
I agree. Putting anything of value in a safe deposit box is a very bad idea. Banks have already been instructed to seal all safe deposit boxes on order from the bank supervision.
250k is what the FDIC says, just like the FED has 8000 tons of gold.
The checks in the mail, and I would not keep 25k in the bank with these bozos.
Demonocracy has a sobering infographic about the FDIC
The FDIC Illusion of Insured Bank Deposits
http://demonocracy.info/infographics/usa/fdic/fdic.html
bank accounts are already bailed in thanks to years of negative rates (inflation adjusted)....someone has to pay for a mutli-year rocketing stock market. it's never a zero sum game
I think we can all agree that the government can do anything it wants. If this guy has a secret document to share, why doesn't he just publish it here instead of all the BS he publishes to get your email address. I'm sure we can all come up with "what ifs". How about the Treasury uses a crisis to change the currency? They'll exchange it on a one for one basis and the old currency is voided. However, if you try to exchange more than say, 10K, you need to prove where you got it or it's GONE. As far as doing away with cash completely, a change to the constitution has to be ratified first. Possible? Sure, but many, many years of litigation away.
Is the pope Catholic?
Can a bear sh*t in the woods?
We are making 1,000 copies available for FREE the general public.
To pick up yours, swing by….
http://www.phoenixcapitalmarketing.com/cash.html
If you want one you better hurry up...there are only 15 copies left!
+1 just for your name... lol
Now that's funny.
Running out of spam;)
On the banks side is trillions of dollars, unlimitted politcal power, the law itself, the military and all its might, the police state, the incarceration complex, the courts, and all media. On your side just you. In a conflict between you and the bank the bank wins every single time with no exceptions. And that is why you should keep some cash under your mattress for anything above immediate living expenses and why you should be stacking with anything left over...
Article appears to be self-contradictory (and deliberately misleading?).
Is the article claiming ALL deposits, including those under $250k,
could under present law legally be converted to "equity" in the bank?
If so, then that should be directly so stated.
Instead of:
"…Insured depositors themselves would remain unaffected."
"any liability at the bank is in danger of being written-down"
Of course, an "emergency law" affecting small deposits could be enacted overnight.
But if such is the case, and if that is the "legal" danger for small depositors,
then that should be clearly so stated.
Is the danger primarily to corporate/business accounts?
It is likely that not too many (including ZH readers) have personal bank deposits over $250K.
under president barrak obama or bernie sanders, absolutely
under president donald trump, over his dead fucking body as that would be the end of America
A not bad article on an important subject BUT,
If it's not good enough for the writer to PROOF,
it's not good enough for us to READ.
It's not an article, it's a scare Ad.
Like all the other bottom feeder Penny Stock Paid Newsletter charlatans use to sell their products.
You guys have never seen one of these before?
What are you a english teacher, who cares, most people can't spell rhythm.
No banks are safe.
HAHAHA, at first glance i read "No, banks are safe" and thought why does a troll get up-voted?
This is one of the few things that need to happen, people need to be forced into reality.
Yeah well my fucked up bank WF stopped Saturday business hours recently and then just the other day the on line button to transfer money from one account to another stopped working. And the online button still doesn't work and the phone in number was swamped with calls and the teller gave no explanation for this shit. Now a friend of mine in Fiji reports that his ANZ and Westpac accounts are having all sorts of online problems. He wants to pull his money out. If you don't at least have cash you better wake the fuck up and go down and get some. This shit's going down really soon.
never expect the csr to know any details except how to send you a gift card for your trouble.
yeah, get some cash ready
These banksters don't miss a trick, do they?
KILL THE BANKS.
I say starve the banks. Banks don't pass the bills and sign them into law, .gov does. And what is the root of .gov's power? The Constitution, beloved by crazy people.
The root of .gov's power is the banks. The root of the banks' power is .gov.
The problem is not the banks, but the people who control them. As long as the sheep don't know or care they can get away with it. Unfortunately by the time sheep find out, it'll be too late to do anything about it.......
"KILL THE BANKS"
Nationalize the banks, particularly the Central Bank, would do the trick.
m.
Nationalize? So they'd be run by whom? Our selected representatives? c'mon now.
It could never happen here, our banking system is too exceptional lol.
This is going to end badly, truly badly.
The only reason I can think of for the Gubmint to seize its easy-print funny money is to propagate in the minds of the citizenry the illusion that it has inherent value.
They've already started the trend. Obama has a pen and a phone.....and HE'S USED THEM.
For all practical purposes, the Constitution is non-existant. This has set a dangerous precedent for ALL presidents to follow.
With the exception of a "super majority".
Haha. That fuckhead hasn't set any new precedents. He is just the latest in a long line of .gov goons, just like the current Congress and SCOTUS. Unfortunately, the Constitution still exists, which is why we're in this mess. .gov is all-powerful and has been since 1788.