"Bail-in" Will Now Be the Rule in Europe
The Cyprus "bail-in" solution that shocked so many has now spread to the rest of the EU.
If you remember, when the EU decided to confiscate money from depositors in a failed bank in Cyprus, the term "bail-in" was coined. "Bail-in" was used to distinguish this approach from the previous approach where the taxpayer would be called on to "bail-out" a failed bank. What shocked so many was how accounts were frozen and money literally evaporated from depositors accounts.
After that initial shock, there was much banter from the EU about how such a solution would not become the usual method of dealing with bank failures in the future. Their concern at the time was that if bank depositors thought this was a possible solution, they would withdraw money from European banks en mass, thus precipitating a run on the banks. And so we heard how such a solution was not under consideration. Indeed, we pointed out in May that this claim was absurd and purposely misleading. And so it has come to pass that "bail-in" will indeed be the way things are handled in the future.
As for that initial fear of bank runs, I suppose that enough time has passed, and that initial fear of bank runs is no longer a concern. Hence we today have this:
And so it seems those early assurances that "bail-in" would not be the wave of the future were the typical dissembling comments made by central bank officials and government authorities designed to keep the "sheeple" calm and return them to their usual apathetic, half-conscious, distracted state of mind, freeing the way for bail-in to now become the rule. And, you know what, those officials were right. It seems it worked. Surprised?
Do you keep substantial sums of money in banks? Can you see why having substantial sums in banks presents a danger? What's that you say, this only applies to European banks? Oh, I see. So bail-in could never come to the U.S., right?
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If you remember, when the EU decided to confiscate money from depositors in a failed bank in Cyprus, the term "bail-in" was coined. "Bail-in" was used to distinguish this approach from the previous approach where the taxpayer would be called on to "bail-out" a failed bank. What shocked so many was how accounts were frozen and money literally evaporated from depositors accounts.
After that initial shock, there was much banter from the EU about how such a solution would not become the usual method of dealing with bank failures in the future. Their concern at the time was that if bank depositors thought this was a possible solution, they would withdraw money from European banks en mass, thus precipitating a run on the banks. And so we heard how such a solution was not under consideration. Indeed, we pointed out in May that this claim was absurd and purposely misleading. And so it has come to pass that "bail-in" will indeed be the way things are handled in the future.
As for that initial fear of bank runs, I suppose that enough time has passed, and that initial fear of bank runs is no longer a concern. Hence we today have this:
(Reuters) - The European Union agreed on Thursday to force investors and wealthy savers to share the costs of future bank failures...
Do you keep substantial sums of money in banks? Can you see why having substantial sums in banks presents a danger? What's that you say, this only applies to European banks? Oh, I see. So bail-in could never come to the U.S., right?
More...
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