Get out of Big Banks RIGHT NOW!!!!!!
It’s now legal for a big bank to confiscate your money without warning and at their discretion.
The next big bank failure will not be resolved with a government-taxpayer Bail-Out but rather a depositor Bail-In.
(note: A big bank is any financial institution involved with derivatives trading)
A few months ago I discovered that US banks are not legally required to give you cash whenever you request a withdrawal. It turns out that as soon as you deposit money in a bank, the funds become the bank’s property and you become an unsecured creditor holding an IOU from the financial institution. In trying to verify this I began researching the US financial system. As I dug deeper I uncovered a complex series of federal laws, risky big bank financial maneuvers, international financial group agreements, secret G20 leader approvals, and a mysterious, relatively unknown organization which happens to be most powerful financial entity in the world. These convoluted pieces of information came together when I unearthed a document co-authored by the US Federal Deposit Insurance Corporation (FDIC) and the Bank of England outlining how the next big bank failure would be handled.
As of December 2012, federal laws, government agency approvals, international agreements, and tactical procedures are in place so the next big bank failure will trigger an entirely new resolution policy. No longer will there be a government-taxpayer funded Bail-Out, but rather a depositor Bail-In. The big banks will be allowed to confiscate your deposits at their discretion with no prior notice. Your compensation for the bank’s absconding with your money is a new issuance of stock (equity) in their bank.
In other words, you may walk into your bank one day and instead of getting cash for a withdrawal request, you will receive a stock certificate and it will be your responsibility to convert it to cash. This legal seizure of your money will most likely happen in just one night in a process called “overnight sweeps.”
Bottom line – you immediately need to move all your funds from big banks to other institutions or investments. Assets in J.P. Morgan Chase and Bank of America are especially vulnerable.
Sound unbelievable? Doubt this could actually happen? Think again – it already has. In March 2013, Cypress became the first nation to experience this new policy formally referred to as “Resolving Globally Active, Systemically Important, Financial Institutions”[1] (translation – procedure to save big banks in lieu of a government-taxpayer Bail-Out). The confiscation of depositor funds (hence the name Bail-In) in Cypress was not only approved but mandated by the European Union, along with the European Central Bank and the International Monetary Fund. They told the Cypriots that deposits below €100,000 in two major bankrupt banks would be subject to a 6.75% levy or “haircut,” while those over €100,000 would be hit with a 9.99% “fine.” When the Cyprus national legislature overwhelming rejected the levy, the insured deposits under €100,000 were spared; but it was at the expense of the uninsured deposits, which took a much larger hit, estimated at about 60 percent of the deposited funds[2].
Think your money is safe if it’s insured by the Federal Deposit Insurance Corporation (FDIC)? It’s not. First of all, the FDIC can only protect your deposits if it has the money itself. With trillions of dollars in deposits and only $33 billion in the FDIC fund (as of 12/31/12), and the Dodd-Frank mandate of no more taxpayer bail-outs, there’s nowhere to get the money except from the depositors. The FDIC was set up to ensure the safety of deposits. Now, it seems, its function will be the confiscation of deposits to save Wall Street by executing the new big bank failure resolution strategy of Bail-In.
After I had compiled this information, and even though the result was staring me in the face, I still just couldn’t believe it. I’m not a financial maven so I reasoned I must have misinterpreted something. Consequently, I contacted a friend with extensive financial acumen and asked him to refute my research. His past experience includes serving as an advisor to two administrations on banking legislation and a former bank CEO. He now assists investor groups in applying for a federal bank charter or researches the purchase an existing institution for possible acquisition. Upon completing his analysis he decided to transfer 80% of his bank deposits from Money Center Banks to smaller well-capitalized federal banking institutions and federal credit unions. That’s good enough for me. I cashed out and started researching alternatives to big banks.
[1] This document can be obtained at the US Government FDIC website. http://www.fdic.gov/about/srac/2012/gsifi.pdf Paragraph 13 explicitly describes the now legal process to confiscate depositor funds. You also can get the document at my website http://www.randylangel.com/downloads.html
[2] http://www.forbes.com/sites/timworstall/2013/03/31/theres-something-very-strange-about-the-cyprus-bank-haircut-very-strange-indeed/
As of December 2012, federal laws, government agency approvals, international agreements, and tactical procedures are in place so the next big bank failure will trigger an entirely new resolution policy. No longer will there be a government-taxpayer funded Bail-Out, but rather a depositor Bail-In. The big banks will be allowed to confiscate your deposits at their discretion with no prior notice. Your compensation for the bank’s absconding with your money is a new issuance of stock (equity) in their bank.
In other words, you may walk into your bank one day and instead of getting cash for a withdrawal request, you will receive a stock certificate and it will be your responsibility to convert it to cash. This legal seizure of your money will most likely happen in just one night in a process called “overnight sweeps.”
Bottom line – you immediately need to move all your funds from big banks to other institutions or investments. Assets in J.P. Morgan Chase and Bank of America are especially vulnerable.
Sound unbelievable? Doubt this could actually happen? Think again – it already has. In March 2013, Cypress became the first nation to experience this new policy formally referred to as “Resolving Globally Active, Systemically Important, Financial Institutions”[1] (translation – procedure to save big banks in lieu of a government-taxpayer Bail-Out). The confiscation of depositor funds (hence the name Bail-In) in Cypress was not only approved but mandated by the European Union, along with the European Central Bank and the International Monetary Fund. They told the Cypriots that deposits below €100,000 in two major bankrupt banks would be subject to a 6.75% levy or “haircut,” while those over €100,000 would be hit with a 9.99% “fine.” When the Cyprus national legislature overwhelming rejected the levy, the insured deposits under €100,000 were spared; but it was at the expense of the uninsured deposits, which took a much larger hit, estimated at about 60 percent of the deposited funds[2].
Think your money is safe if it’s insured by the Federal Deposit Insurance Corporation (FDIC)? It’s not. First of all, the FDIC can only protect your deposits if it has the money itself. With trillions of dollars in deposits and only $33 billion in the FDIC fund (as of 12/31/12), and the Dodd-Frank mandate of no more taxpayer bail-outs, there’s nowhere to get the money except from the depositors. The FDIC was set up to ensure the safety of deposits. Now, it seems, its function will be the confiscation of deposits to save Wall Street by executing the new big bank failure resolution strategy of Bail-In.
After I had compiled this information, and even though the result was staring me in the face, I still just couldn’t believe it. I’m not a financial maven so I reasoned I must have misinterpreted something. Consequently, I contacted a friend with extensive financial acumen and asked him to refute my research. His past experience includes serving as an advisor to two administrations on banking legislation and a former bank CEO. He now assists investor groups in applying for a federal bank charter or researches the purchase an existing institution for possible acquisition. Upon completing his analysis he decided to transfer 80% of his bank deposits from Money Center Banks to smaller well-capitalized federal banking institutions and federal credit unions. That’s good enough for me. I cashed out and started researching alternatives to big banks.
[1] This document can be obtained at the US Government FDIC website. http://www.fdic.gov/about/srac/2012/gsifi.pdf Paragraph 13 explicitly describes the now legal process to confiscate depositor funds. You also can get the document at my website http://www.randylangel.com/downloads.html
[2] http://www.forbes.com/sites/timworstall/2013/03/31/theres-something-very-strange-about-the-cyprus-bank-haircut-very-strange-indeed/
I have written a paper describing how Bail-In became law, who the big winners will be in the next big bank failure (guess who it is?), and the ramifications for the ordinary citizen/depositor. The paper contains:
- Bail-In Example – How your money will be confiscated.
- High-level Summary Timeline - Events/ramifications leading to the Bail-In method becoming the US Government’s new official policy to resolve a big bank failure. This version is for those wanting only the important points without the detailed corroborating evidence.
- Short Term Fix - A step-by-step tutorial to find and rate a credit union or community bank to move your money.
- Possible Legislative and Long Term Solutions, including references and links to additional information sources.
- Detailed Timeline - Events/ramifications proving that Bail-In is real and undeniable. This version substantiates the new bank failure resolution technique with comprehensive references and links throughout. Info-graphics pictorially demonstrate the magnitude of big bank’s derivatives risk exposure – the most likely catalyst of the next bank failure thus triggering Bail-In.
| Get Out of Big Banks NOW V2-1.pdf |
Question - If you deposit money in a bank, is the institution legally obligated to return cash to you? (The answer is NO!)
Although few depositors realize it, legally a bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. But until now the bank has been obligated to pay the money back on demand in the form of cash. However, these are not normal times.
The 2005 Bankruptcy Act, mandated that any bank involved in derivatives trading would be first in line to claim any hard assets (e.g., deposits) of a failing institution. The FDIC, ordinary depositors, municipal or state government accounts are last. In other words, the banks taking the biggest risks are protected and will be saved no matter what.
After the financial crisis of 2008, Congress passed the Dodd-Frank Bill which prohibits direct tax payer Bail-Outs of troubled financial institutions. Under a plan called Resolving Globally Active, Systemically Important, Financial Institutions, jointly agreed to by the US FDIC and the Bank of England on December 10, 2012, our IOUs (i.e., our deposits) will be converted into “bank equity.” The bank will get the money and we will get stock in the new reorganized bank company. With any luck we may be able to sell the stock to someone else, but when and at what price?
On page 3, paragraph 13 of Resolving Globally Active, Systemically Important, Financial Institutions it states;
The 2005 Bankruptcy Act, mandated that any bank involved in derivatives trading would be first in line to claim any hard assets (e.g., deposits) of a failing institution. The FDIC, ordinary depositors, municipal or state government accounts are last. In other words, the banks taking the biggest risks are protected and will be saved no matter what.
After the financial crisis of 2008, Congress passed the Dodd-Frank Bill which prohibits direct tax payer Bail-Outs of troubled financial institutions. Under a plan called Resolving Globally Active, Systemically Important, Financial Institutions, jointly agreed to by the US FDIC and the Bank of England on December 10, 2012, our IOUs (i.e., our deposits) will be converted into “bank equity.” The bank will get the money and we will get stock in the new reorganized bank company. With any luck we may be able to sell the stock to someone else, but when and at what price?
On page 3, paragraph 13 of Resolving Globally Active, Systemically Important, Financial Institutions it states;
An efficient path for returning the sound operations of the G-SIFI (Global Systemically Important Financial Institutions) to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.
On page ii, of Resolving Globally Active, Systemically Important, Financial Institutions it states;
”The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover, with some converted partly into equity in order to provide sufficient capital to return the sound businesses of the G-SIFI to private sector operation.” Resolving Globally Active, Systemically Important, Financial Institutions, coauthored by the FDIC & the Bank of England, December 10, 2012, Page ii.
Note 1: unsecured debt holders are ordinary bank depositors like you & me
Note 2: G-SIFI stands for Global Systemically Important Financial Institutions (this means big banks)
A few important points to realize
- Instead of getting cash for a withdrawal request, you will be informed that you have stock instead and it will be your responsibility to convert it to cash. Of course, a bank that takes this action will probably have stock valued much lower than when the institution confiscated your funds so you will be left with whatever you can get for it.
- If our deposits are converted to bank stock, they will no longer be subject to insurance protection of the FDIC. Why? Because the FDIC only insures cash accounts not equity accounts. Cute trick. Now instead of cash, you will be “at risk” and vulnerable to being wiped out.
