Cyprus stealing from citizens' accounts

H

Horn6721

Hook'em
So the Eurozone tells Cyrpus it must come up with about 6 Billion of it's own if it wants the EZ to bail them out with 10B.

Cyprus gov't decides to go into private bank accounts and take what they need to make up the 6 Bil.
It started out at 9.9% for accounts over approx $125,000-130K dollars and 6.75 for accounts with less than the 130K

Not surprisingly this created a run on the ATMs Saturday and today chaos in the Euro markets.
There may be some adjusting of the % the gov't will take but the gov't will take money directly from people's accounts ( including many Russians who parked their money there)

If this works how many other nations will do the same?
The Link
 
Well for sure other European nations will give this a serious look IF it works.
I can't see this ending well for the people with money in Cyprus banks or the EZ

While I am sure BO will at least discuss the idea- never let a good crisis go to waste -there is , for now, NO WAY it could happen here
for now
 
This tactic was used in Denmark not too long ago so it is not a new effort.

As for people's deposits, they currently represent 0 Dollars in Value. The whole banking system in Cyprus is insolvent. There is no money for the banks to give the deposit holders back their funds.

So the EU insurance scheme is willing to make good as long as the Cypriots get a reminder that it is not good to court Russian money by promising unrealistic deposit yields and then use those funds to buy speculative assets. Cyprus is much more of an offshore gambling market than it is some poor little nation getting bullied by the mean Europeans.
 
Why is this stealing? Cyprus took $25 Billion in deposits and turned it into zero. The EU is agreeing to bail them out but is asking for $2.5 Billion reduction so they can in turn sell it to the German taxpayers who are currently bailing out the lazy and irresponsible members of other nations.
 
Forget the Russians and corps

Why isn't this stealing from the individual saver who put their money into the bansk?
 
Because the local Cypriot banks have already lost 100% of the savers money. You are saying it is morally reprehensible, or theft, that the EU agrees to take money from responsible countries to bail out members of a less responsible country and only charitably makes whole to the tune of .90 cents on the dollar rather than donate the whole dollar.

I don't consider that theft. I think the Cypriots should be glad Germans and French are their to save them.
 
To be clearer, the only other alternative here was for the banks to all go bust and the savers get nothing.
 
Ag
it was not mentioned in any of the articles I read that the Cyprus banks were broke. In fact it was mentioned that the banks had assets worth 8 times the Cyprus GDP.

When I read that there are assets and large assets I do not think that means bankruptcy.
can you see why I would think taking money out of accounts screws the small depositor
well all depositors?
 
It is without question that the banks in Cyprus were broke.

The size of the assets in the Cyrpus banking system is irrelevant except to show how it had mushroomed into a an offshore backdoor market for foreigners looking to take advantage of EU deposit insurance.

All that matters is the liabilities owed by the banks are much larger than the bad loans and bad investments the banks carry on the books. You can confirm this here.

The Cypriot banks have been on life support for a year now due to EU emergency funding and its Prime Minster has said so publicly for quite some time now.

In reply to:
Click to expand...
 
well now that you explained it it looks like the best option for the people with accounts

Thanks for explaining it
Now that I understand I think it sucks that the large russian corps and big money people will also get bailed out
and at that they will still be ahead.
 
DFW - the only issue i have with your thesis is that post LB collapse the EU guranteed depositor accounts up to 100k Euros.

Whereas I wouldn't have kep my money there if I was some fisherman with 20000 Euroesin the bank I would have felt safe, because if the banks went bust the deposit insurance would make me whole.

The government just stealing it, for whatever reason, might not have occured to people.
 
I agree that the ECB essentially modified a very recent offer of insurance on the fly which is worth some protest. I do find it strange that people keep referring to this as theft though. Is Federal Income tax here in the US theft? Are inflationary policies theft? We should be consistent when talking about the toll we have to pay as citizens to be part of a nation.

Governments have been requisitioning the fruit of our labor by force for years in many forms. Cyprus just introduced a new form of seizing. There is a bit of selective outrage going in the interpretation of this event.
 
-----------------------------------------------------------
Is Federal Income tax here in the US theft?
__________________________________

Yes, imho
 
Taxing bank deposits? What a horrible idea. Talk about a poison pill. I can't believe they even proposed this. I am not sure what type of idiot would still have his money in a Cypriot bank but now even that idiot will figure out he needs to move his assets somewhere else.
 
Why is taxing bank deposits any different from being taxed at the pump or being taxed in advance or being subject to any other form of government requisitioning of your assets?
 
And I would pose another question to the board.

If you put a bunch of your currency into Worldcom shares and they later sank to zero, would you expect someone to come make you whole? If you bought a late model car and then ran it into a wall, would you expect a government to cut you a check to make you whole?

At the the root of this discussion are two points:

1) paper money is just another store for your wealth, at its core no different than stock certificates or lumps of gold in its basest trade-able definition. Even a cursory reading of history teaches us that paper money fluctuates wildly in terms of purchasing power so no one should ever feel it is a risk-free asset.

2) Banking collapses are the rule rather than the exception and this is just another reminder of that. Banks are regulated ponzi schemes that rest solely on the confidence of the parties that lend their assets to the bank, depositors in this case. While we Americans luckily have a a government infrastructure that protects us, most other parts of the world do not so the aggrieved citizen angle only goes so far.

So in my view this is another example of people thinking they are bulletproof when it is obvious that risk is involved in what kinds of assets they own and where they store those assets. That is why I have little patience for the "THIS IS THEFT!" crowd. Small country citizens watched their banks turn into leviathans that their government could never properly backstop or control and now are shocked that the rickety foundation of that system has collapsed. They should have bought Euros or Gold.
 
Or not relying on the Cyprus banking system or holding other inflation protected assets.

See my above post on the "banks are always sound" logic.
 
What is unique about this situation is that the pecking order has been turned upside down. In a bankruptcy, traditionally shareholders get wiped out first, then bond holders, and then depositors. But the EU has changed the rules. Now, depositors are the first to go.

A deposit is a loan to a bank. People put their money in banks for two reasons.
1) Safety.
2) To receive interest to keep up with inflation.

Now, both of those things are out the window. Despite a guarantee that deposits up to $100,000 Euros were insured (the equivalent of FDIC), the proposal was to take a portion of money under the false pretext of calling it a tax. So safety is no longer a banking feature. Secondly, at least in America with Bernanke's zero interest policy, depositors get practically zero interest.

I don't see how Southern Europe will escape a large run on their banks within the next few months.
 
And I do agree this is a dumb policy, primarily for the reasons you mention but also because there is nothing to gain IMO in terms of precedent regarding moral hazard.

I just object to this as supposed theft. It is just a slightly less generous bailout offer. People need to understand that.
 
And again I say "what money". There is no money. It was placed in a bank that in turn placed it in speculative bets on Greek and Cyprus real estate finance that has since melted down and all the cash is now gone. All that is left in the bank is a bunch of IOUs to the deposit holders and bondholders.
 
DFW,

You hold American banks in higher regard than I do. And of course its theft. When I put money into a bank, its not so it can be lent out to others. Its so that it is safe from theft, as opposed to under my mattress. Banks are where people put money to be protected, not just taken by the government because it "needs" it to pay off national debts.

If the argument is that you should be ok with your money just being taken out at a moments notice because the government needs it, when there is something terribly wrong with that.
 
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