Cyprus bail out deal

shedweller

Bob_Latchford wrote: »

why isn't there a public/nationalised alternative to private banks? Who dont leverage the deposit money out to risky investments (or investments with risk) but just offset it against national debt?

Dangerously close to the "greenback" idea that Abraham Lincoln wanted to bring in. Never going to happen.

Amberman

shedweller wrote: »

Dangerously close to the "greenback" idea that Abraham Lincoln wanted to bring in. Never going to happen.

Never gonna happen? Like the Greenbacks Lincoln "wanted" to bring in??

Amberman

Bob_Latchford wrote: »

why isn't there a public/nationalised alternative to private banks? Who dont leverage the deposit money out to risky investments (or investments with risk) but just offset it against national debt?

The have that in North Dakota and offset it (kinda) against state debt. Works very well for the locals. 3.7% unemployment...unemployment hasnt risen above 5% since the 1980's. Very low taxes as well.

KyussBishop

Bob_Latchford wrote: »

why isn't there a public/nationalised alternative to private banks? Who dont leverage the deposit money out to risky investments (or investments with risk) but just offset it against national debt?

There's pretty much no reason not to do this, but it would end the private banking systems ability to engage in rent-seeking upon the rest of society (charging interest on money they create from nothing), so there is a lot of political opposition against this.

It's only a step or two removed from giving government use of money creation, instead of private banks (which would eventually end most forms of private rent-seeking, pissing off a lot of rich business/finance people), and forcing private banks to be full reserve; there are a lot of monetary reformists, trying to bring this about:
www.positivemoney.org

Bob_Latchford

Thanks, I wasnt so much coming to this from a banking system point of view, more as a customer with deposits who is now seen as an "investor" in a private bank and looking for an alternative

Having a nationalised bank would, in my naivety, solve some problems. The deposit would be full matched against sovereign debt, so pretty much guaranteed whatever the amount. No need to be an 'investor' in anything other than your own country,

It would act as a safe haven in times of trouble. If you were worried about your own private bank, just transfer it over to the national bank. This frees up the regulator to wind up everything in a struggling bank, depositors, bondholders etc the whole thing takes the haircut, Its now explicit that leaving money in a private bank is not risk free.

Obviously i must be missing something though as i havent heard this in the mainstream

KyussBishop

Nope, you're not really missing anything there, that is workable and it would be a good idea (savings would be like buying bonds i.e. government debt, which is definitely a good place to put money); it would be good for depositors, and bad for banks, though it wouldn't help resolve the current problems banks are facing.

KyussBishop

Here is a good interview on public vs private banks, which goes into great detail on the effects of private banking, financialization and privatization (no need to watch directly, can just leave audio on while doing other stuff):
https://www.youtube.com/watch?v=hkUNaO4T6gI

Amberman

Not sure if this has been covered, but for everyone who thinks that those evil Russian oligarchs got slapped in the bailout deal, it appears not. Massive outflows happened from foreign branches of the Cypriot banks while the bank holiday was in place.

http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus

shedweller

^^^^^
It's almost like that was meant to happen. That the ordinary guy gets stung.
Was Cyprus a test case? Will it come here? We'll be told it won't of course, but while hot air is wafting from our great leaders gobs, the people with the money (ie: in the know) will be exiting stage left with the money.

We'll pick up the pieces while being told that we should have understood the risks etc. etc.

I'll be pulling my savings out!

shedweller

http://www.globalresearch.ca/it-can-happen-here-the-bank-confiscation-scheme-for-us-and-uk-depositors/5328954

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.

Lehman had only two itty bitty banking subsidiaries, and to my knowledge, was not gathering retail deposits. But as readers may recall, Bank of America moved most of its derivatives from its Merrill Lynch operation [to] its depositary in late 2011.

Its “depositary” is the arm of the bank that takes deposits; and at B of A, that means lots and lots of deposits. The deposits are now subject to being wiped out by a major derivatives loss. How bad could that be? Smith quotes Bloomberg:

. . . Bank of America’s holding company . . . held almost $75 trillion of derivatives at the end of June . . . .
That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

Is this information correct?

Scofflaw

Amberman wrote: »

Not sure if this has been covered, but for everyone who thinks that those evil Russian oligarchs got slapped in the bailout deal, it appears not. Massive outflows happened from foreign branches of the Cypriot banks while the bank holiday was in place.

http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus

While the amounts are uncertain, the fact that the Cypriot government allowed that to happen while it prevaricated is unimpressive.

cordially,
Scofflaw

shedweller

^^^^^
But they still allowed it. Bottom line? We get stung. Same as it ever was.
We can dress it up whatever way we want, it all comes down to us, the plebs.

Same as it ever was, and will be.

Scofflaw

shedweller wrote: »

^^^^^
But they still allowed it. Bottom line? We get stung. Same as it ever was.
We can dress it up whatever way we want, it all comes down to us, the plebs.

Same as it ever was, and will be.

No, it's still only large depositors in Laiki. They're just being hit harder.

cordially,
Scofflaw

Amberman

Scofflaw wrote: »

While the amounts are uncertain, the fact that the Cypriot government allowed that to happen while it prevaricated is unimpressive.

cordially,
Scofflaw

I agree that its unimpressive, but I think that foreign branches operating under, lets say, UK law, were unable to impose the bank holidays, so if you had a million in a Cypriot bank, all you had to do during the bank holiday was get your bad self over to London and withdraw from a branch there. Thankyou Easyjet.

Again, I'm not 100% sure this is correct, but it looks that way.

Scofflaw

Amberman wrote: »

I agree that its unimpressive, but I think that foreign branches operating under, lets say, UK law, were unable to impose the bank holidays, so if you had a million in a Cypriot bank, all you had to do during the bank holiday was get your bad self over to London and withdraw from a branch there. Thankyou Easyjet.

Again, I'm not 100% sure this is correct, but it looks that way.

If a bank can manage to close for training, it can certainly manage to close to prevent deposit flight! There are no rules requiring a business to open its doors.

The explanation they gave, as far as I recall, was that they'd had no instructions from Cyprus.

cordially,
Scofflaw

Sponge Bob

But is the adjustment from a 30% ish loss to a 60% ish loss for Laiki depositors entirely related to leakage from London???

pipie

Scofflaw wrote: »

No, it's still only large depositors in Laiki. They're just being hit harder.

cordially,
Scofflaw

.....and the BoC too, 37.5% of deposits larger than €100,000 to be converted to shares, and 22.5% to be frozen for up to 90 days, but may be converted to shares in order to recapitalise the bank. - 60%

Scofflaw

pipie wrote: »

.....and the BoC too, 37.5% of deposits larger than €100,000 to be converted to shares, and 22.5% to be frozen for up to 90 days, but may be converted to shares in order to recapitalise the bank. - 60%

Yeah, I see that now. Thanks for the update.

Sponge Bob wrote:

But is the adjustment from a 30% ish loss to a 60% ish loss for Laiki depositors entirely related to leakage from London???

Hmm. None of the mainstream media seem to be drawing the connection, for what that's worth.

cordially,
Scofflaw

Sponge Bob

Well then the 37%/23% split for a total of 60% looks like a contingency was added for 'some reason'.

Maybe they noticed that Ernst and Young 'audited' Laiki. .... Oh WAIT.....no. It was PWC .

http://www.laikibankgroup.com/EN/ABOUTUS/BOARDOFDIRECTORS/Pages/Home.aspx

Scofflaw

Sponge Bob wrote: »

Well then the 37%/23% split for a total of 60% looks like a contingency was added for 'some reason'.

Maybe they noticed that Ernst and Young 'audited' Laiki. .... Oh WAIT.....no. It was PWC .

http://www.laikibankgroup.com/EN/ABOUTUS/BOARDOFDIRECTORS/Pages/Home.aspx

Yes, it's definitely possible that this is just the original "40%" with a safety margin, which would tie in with the Cypriot claim that "millions, not billions" exited via London.

cordially,
Scofflaw

Amberman

There must be a way to arbitrage this mess. Are capital controls imposed on tourists leaving Cyprus? Can I fly to Cyprus and walk out of the country with 100k in exchange for a London account with, say, 70k in it in a swap deal with a local Cypriot business?

Sponge Bob

Cyprus businesses are highly illiquid, how can they hodl up their end of a deal??

Amberman

Most businesses are now cash only, so liquidity should not be a problem. There are massive issues with the restrictions on money leaving the country for a nation like Cyprus, which is heavily dependent on imports. If they don't allow people to send money out, how will they pay for imports?

If they do allow imports in, you can be sure that there will be huge leakage from the banking system as businesses work to inflate outflows with foreign partners.

Sponge Bob

Arbing in that case involves inflating food bills or energy bills with existing upstream suppliers. It may work, depends on whether suspiciously large invoices from upstream are cleared for payment all the same.

This isn't arbing as I understand it, it is fraud.

Amberman

As if anyone who has just been robbed is going to give a **** about the protecting the robbers.

Sponge Bob

The Finance minister, handed the poisoned chalice less than 2 months back, has resigned today.

Interesting piece on the 'last days of Laiki' on Reuters, the finance minister who resigned headed Laiki until recently ...at least 2 years back.

http://www.reuters.com/article/2013/04/02/us-eurozone-cyprus-laiki-insight-idUSBRE9310GQ20130402