Even in the worst of the Great Depression bank bankruptcies, noted Nathan Lewis, creditors eventually recovered nearly all of their money. He concluded:
When super-senior depositors have huge losses of 50% or more, after a "bail-in" restructuring, you know that a crime was committed.
Exiting While We Can
How can you avoid this criminal theft and keep your money safe? It may be too late to pull your savings out of the bank and stuff them under a mattress, as Shah Gilani found when he tried to withdraw a few thousand dollars from his bank. Large withdrawals are now criminally suspect.
You can move your money into one of the credit unions with their own deposit insurance protection; but credit unions and their insurance plans are also under attack. So writes Frances Coppola in a December 18th article titled "Co-operative Banking Under Attack in Europe," discussing an insolvent Spanish credit union that was the subject of a bail-in in July 2015. When the member-investors were subsequently made whole by the credit union's private insurance group, there were complaints that the rescue "undermined the principle of creditor bail-in" -- this although the insurance fund was privately financed. Critics argued that "this still looks like a circuitous way to do what was initially planned, i.e. to avoid placing losses on private creditors."
In short, the goal of the bail-in scheme is to place losses on private creditors. Alternatives that allow them to escape could soon be blocked.
We need to lean on our legislators to change the rules before it is too late. The Dodd Frank Act and the Bankruptcy Reform Act both need a radical overhaul, and the Glass-Steagall Act (which put a fire wall between risky investments and bank deposits) needs to be reinstated.
Meanwhile, local legislators would do well to set up some publicly-owned banks on the model of the state-owned Bank of North Dakota -- banks that do not gamble in derivatives and are safe places to store our public and private funds.
_____________________
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
8
4
3
