Yes, feds can take your deposits
Global trend sparked by Cyprus' confiscation of accounts balances
Published: 10/08/2013 at 8:32 PM
by Jerome R. Corsi

NEW YORK – Can the federal government confiscate all the deposits in an American citizen’s FDIC-insured bank account?

The answer is “Yes.”

As WND reported, the Dodd-Frank bill allows the federal government to confiscate bank deposits in an unlimited “bail-in” for banks “too big to fail,” provided the account holder gets equity in exchange for the deposits.

In March, Cyprus agreed to confiscate 10 percent of all deposits in Cypriot banks, calculated to result in a 10 billion euro “bail-in” as a condition of obtaining an emergency Eurozone bail-out of 10 billion euros.

The question increasingly getting asked in international banking circles is this: Was the “Cyprus Experiment” in which the government confiscated bank deposits a first step toward what may well become a global trend over the next few years?

EU proposes deposit grab

Anyone who thinks the scenario is merely academic must realize that the European Parliament already is in the process of passing new regulations adopting the recommendation of its Economic and Monetary Affairs Committee. The panel recommends that a deposit guarantee funds should not protect a deposit of funds in a “guaranteed account” can be siezed when financial difficulties call for rescuing a troubled financial institution.
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“How is this possible?” many posting on Twitter and Facebook asked after the WND article was published.

The answer is provided in a little-noticed Dec. 10, 2012, memorandum published by the FDIC in the United States and the Bank of England in the United Kingdom titled “Resolving Globally Active, Systemically Important Financial Institutions.”

This paper redefines “too big to fail” companies as “Globally Active, Systemically Important, Financial Institutions,” or G-SIFIs, in the terminology of international banking.

The goal of the paper is to find a way to save big banks that are facing a financial crisis without having to utilize taxpayer funds to “bail out” the bank with what amounts to either a federal government loan or a federal government equity injection resulting in the government owning some percentage of the bailed-out bank.

The “bail-in” strategy under which some or all private bank deposits are confiscated to resolve a financial crisis was made possible because of powers granted the federal government in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

In banking terms, the strategy creates a single receivership at a top-tier holding company and assigns losses to shareholders and unsecured creditors of the holding company. The aim is to transfer the sound operating bank subsidiaries that emerge from the restructuring to a new solvent entity or entities.

Put simply, bank deposits are considered under Dodd-Frank to be “owned” not by the despositor but by the bank, such that the bank has a contingent liability to owner regarding the deposits.

But that contingent liability can either be honored by the bank giving the account holder back his deposits when requested or giving bank stock should the bank need to confiscate the deposits to make up for a deficiency in the legal reserves required to operate or in any other financial crisis the bank faces.

The stock the account holder receives might not be in the bank where the money was deposited. It could be in the new bank entity or subsidiary that emerges after the “bail-in” has been accomplished.
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http://www.wnd.com/2013/10/yes-feds-can-...deposits/print/