Cyprus stealing from citizens' accounts

You all are missing DFW's point. It is not good policy but, I agree, that it is not stealing.

Joe Cypress has $25 K in the bank. The bank has no money to give Joe. if there is no compromise, Joe gets $0 of his $25. If Joe agrees to be "taxed" for 7% or so, Joe winds up with a little over $23 K. Much better than zero.

That is not stealing. That is offering Joe a chance to recoup $23 K out of $25 K in a horribly failed financial market. Arguing that Cypress is "wrong" here is immaterial. Remember, this isnt the Cypress govt going to the people to make this deal. Cypress is beyond broke. The EU has offered Cypress a deal and it is up to the citizens to either accept it or not.

Again, I think this is horrible policy.
 
when you put money in a bank you are most certainly expecting it to be lent so the bank can make money necessary to provide the service you require.

The most recent proposal has 100k deposits protected which i think is good policy and the russian mobsters paying as much as 40% in a d/e swap to get shares in the crap cypriot banks, which I also think is good policy.

F Russia, they do nothing to help the world community.

I'm sitting in ur equity mornign meeting and out macro guys just said the deal has to be hammered out by COB monday euro time, so in about 20 hours.

Should get interesting.

Edit: Ok " CYPRUS-TROIKA BAILOUT DEAL APPROVED BY EURO-AREA FINANCE CHIEFS
"

Just hit BB - they are doing the 40% haircut for deposits above 100k euros, lower numbers to be spared. I think this is the best solution.

However, it will exacerbate money flows out of shiat places like Cyprus.

Send your money to HK and Sinagpore. Well capitalized, not much too worry about except the 30% Chinese NPLs.
 
It was interesting game theory stuff to watch the Cyprus political class attempt to protect its golden goose banking industry despite that industry having put the country in hock to a huge degree.

I agree this will probably kill their banking industry, which is a good thing as it can't be properly monitored or supported without third parties stepping in.
 
Yes. I was amused to see the Eurostoxx futures were up 1.2% yesterday afternoon HK time.

Sure...this solves everything. sold. this morning down 1.3%
 
Bronco,

By not being good policy, you mean its fraud? Yeah, thats more like it. The question in your scenario is this: Why does the bank have no money? Do depositors sign something that says the bank has their consent to loan out THEIR money in their savings accounts? Is this why we get 1/2 a percent interest on our savings while the bank charges 4-16% interest on the loans we take out? When the bank "borrows" our money that is in our account, do we get an alert when that money is being extracted? Nope, it sure aint. Because the bank isnt really loaning OUR money is it? So WHOSE money is it in fact actually loaning out? No one's accounts show anything being deducted for the purposes of being loaned, now do they? So where the F does that money the bank is loaning come from?

What services does the bank provide, pray tell? Loaning out my money (but not really my money or your money or anyones money hooray!) then going bankrupt? So they can make a profit and then be bailed out?

People have had their heads chopped off for trying to sell this kind of snake oil. The bank "loans" out money that they arent really taking out of anyone's savings accounts (or checking accounts for that matter) and then goes bankrupt and then actually does take the money out of said savings accounts, to no fault of the depositors who put their money into the bank to be protected from theft and because there was a promise of accruing "interest" on those balances. Its complete ********.
 
Good Grief
NOW the EZ is saying it might be necessary to do the same thing with ban accounts in Spain and Italy
if no other solution can be wroked out
 
2003- DFW answered a lot of your points.

I am not sure exactly what you want to know and i dont want to be overly simplistic but typically banks are required to keep "cash reserves" physically in the bank or a central bank of about 10% of their holdings. In the US there exists FDIC insurance up to (i think) $250 K per depositor for FDIC regulated banks. So if the bank goes bust the govt steps in a reimburses account holders up to $250 K. But, even in the USA, if you have $500 K in a bank and the bank goes under, you lose the amount over $250 K.

The Cypress problem is more complicated, but the ECB was willing to bail out the account holders for amounts above the insurance limit (although there is some question if the insurance is collectable or not) if a percentage of the money flowed back to Cypress in the form of a tax.

Remember, this is Cypress not the USA but even here banks go bankrupt a lot and people lose money if they have deposits over the FDIC limit.

The reason it is bad policy is the precedence it sets for the rest of the EU. Money will fly out of banks in economically challenged countries which will make the challenges even harder to deal with.
 
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