Bring back them socks and pots !

– the banks man ! it’s the banks ! –

Bring back them socks and pots !
Last night the ministers of finance of the EU decided upon the way new bank crises should be handled.

Agreement was reached on the order of liability.
1) Firstly shareholders and bondholders shall be held accountable.
2) Then the ‘banking sector’. Nothing specified here, just that they shall start some kinda fund.
3) Then the ‘rich’ accountholders, with -savings- above 100K.
4) Accountholders ( savings accounts) below 100K are left untouched.

This was supposedly done to move the liability away from the taxpayers (!not) / the governments (BLAIRLIKE SPIN, nowadays common ‘to-serve-you-better’ truthtalk).

So government is also moving away from, shaking it’s hands free of, letting it prowl freely, of the banking sector. It’s possible disasters are ‘privatized’. Just like health-care, railways, building corporations etc. were privatized before (long live the liberal parties of our continent!). Again, all this to ‘save’ the tax-payer.

In the new configuration who do you think is the most powerful group (answer = 2) ? Who is the least powerful group (answer = 3, not 4 because of electoral considerations). Which group is most on the slippery slide for future adjustments (answer = 4) ?

Remember that with the first and following bail-outs of Greece the european banking sector -did- contribute, allbeit with quite some resistance and in ever smaller portions. When Cyprus came along this did not even enter into the discussion. (So much for Cyprus as a template for future bail-ins, objective is clear: go after the private saver.) The original bail-in plan even had savers -below- 100K accountable. This was dropped after some political upheaval and luckily we could smokescreen it all with barbarian russians.

So what will probably happen next, say if Italy starts running into problems ?

  • The very ‘rich’ savers will already have found all kinds of ways to safeguard their money. And the nice bankers and financial sector will get a nice business boost finding these loopholes.
  • The ‘rich’ savers will try but will fail to get their money safe. They will be mercilessy gutted. (Please note: this might well include your parents who have sold their house (where you grew up in) and moved into a nice, rollator/wheelchair accommodating, comfy studio.)
  • After the next crisis, or in a year, or two, the 100K limit will be lowered to 90K then to 80K etc.
  • People will start putting their money in socks under the bed and pots in their gardens. Your money will be as safe as in the Middle Ages. There’s a good confidence building, economy stimulating measure for you !

Bottom line is that the new agreement makes the savers accountable. You put money in the bank because it is not safe in a pot in your garden or a sock under the bed. And maybe to get a measly interest. You are -not- investing in the bank. You are -not- part of the financial sector (watch out for this upcoming mingling of concepts in the near future). You should -not- be held accountable.

It should be clear that the banks phucked up in a major way over the last decade. Monitoring and surveillance of the banks and financial sector (who have the real WMD’s, Weapons of Mass-Destruction in their hands) has only marginally increased. This should be done by governments and the sector itself.

The best way to incite this increased surveillance and better banking practises is to lay the liability solely with the banks themselves (group 2). To make privates savers liable, is not only unjust and most probably economically counter productive, it removes this incentive. (That group 1 is liable is obvious.)

And as for you as private, little, citizen (Calimero as we’d say here in the nl), what to do ?
“Bring back them socks and pots !”

– — –
ps:
– In practise it probably won’t work. The bank’s leveraging is probably too high for groups 1 + 2 (who’ll bemoan, bewail, bitch that they are needed for ‘recovery’) and 3 to handle. Group 4 can’t save them either. So the governments (or ~ECB) will step in again, meaning you. And we’ll be right back where we started. Only this time private savings wiped out, and banks have a formalized ‘contract’ for limited liability. Maybe it can just handle a crisis of the size of, say Cyprus.
– I don’t have > 100K at the bank. Far from it, I would say :-(

bail-in

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Eurocrisis: Cyprus. Say goodbye to 7% of your savings :-)

— the banks man ! it’s the banks ! —

Just heard that with the last eu-aid to Cyprus private savings accountholders are going to ‘contribute’ to the bail-out with around 6-10% of their savings.

Seems to me to be a silly measure (and a very scary precedent):

  • It comes out of the blue. Nearly -totally- unexpected, especially for the holders of accounts less than 100K. You just cannot implement such a ‘revolutionary’ measure out of the blue. It makes you unpredictable and untrustworthy. Bodes very ill for the confidence in the EU.

    One of the strong points of European countries is that they have had, and still have, a “right of law”. We could always fall back on some fundamental, unassailable, civic rights. An important part of our -economic- right of law is now being grossly trampled upon.

  • I can remember that with one of the last bail-outs for Greece there was talk of the private sector (being banks as stakeholders/culprits) contributing. I have heard no mention of this in relation to the current Cyprus bail-out.

    So now it’s the private citizen, not only his salary/pension/social security/health care, but also his savings being held to ransom/ransack.

    When I lived in Spain and a little child, say Natalie, was murdered the village would express it’s anger and emotions with placards saying “Todos somos Natalie”, “We are all Natalie”. Now, or some day soon, maybe we can say “We are all Cypriots !”. We may think we are safe here in nw-europe but I doubt it.

  • Of course we now get nice stories like “yeah it’s russian black money/money laundering”, or “cypriot bank-holdings are totally out of proportion with GDP”. Nice convenient story like “Greeks are lazy” and the Greeks “doctored the state-books”. Let’s just put the blame/justification on the russians. And not look at how this could have happened (failing brussel/frankfurt control, response) and how to take measures to prevent it from happening again.

    Even worse, let’s not try and explain it to the Cypriots, them not being us of course. Just a little powerless country. (duh, like greece, portugal, spain, italy, france even ?) And besides, they eat garlic there.

  • I kinda remember that the EU has just passed an european union wide ‘deposit insurance’ guaranteeing savings below 100K. If that measure has indeed been passed this is really an outrage and should actually not be accepted.

I wonder how the public is going to react tomorrow in Spain, Italy, and maybe France. We shall see. (Let’s forget about the reaction of the financial markets for a moment, they just wanna max their profit, no matter what. And the eu is, also, about citizens is it not ?)

Tomorrow is monday, march 18, 2013.

See also, a bit more technical, Cyprus: A Brutal Lesson in RealPolitik. And Schumpeter’s The Cyprus bail-out: Unfair, short-sighted and self-defeating.

— Jeroentje dat heppie fout gedaan, niet teveel van dat soort foutjes maken hoor !
Want je moet binnenkort, na Rutte II, wél verstandige dingen gaan doen ! —

— the banks man ! it’s the banks ! —