Did any fellow PM bulls ever think....

[Marchas45]

Here is the latest video with Greg Hunter and Peter Schiff and Peter explains it a lot better than I could ever hope too. He talks about the FDIC Insurance also, so listen for that. He mentions $33 billion to insure $10.8 trillion in deposits

The FDIC has just $33 billion to insure more than $10.8 trillion in deposits.

Sorry about that.






Here's a new one just out: http://www.silverdoctors.com/fdic-bank-of-england-create-resolution-authority-for-unlimited-cyprus-style-bail-ins-for-tbtf-banks/#more-24140

The SilverDoctors site has been hacked because of this story but it will be up again as soon as possible. This is a must read.

 

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[TreasurePirate69]

I read something today saying that some of the bank customers could lose 80% of their deposits if they are over 100K Euro and in one of those two banks being affected, and that the 40% figure is just an "average" based on all the different types of loses that will be happening at the bank as a result of all this. I don't know if that is true or not.

PS To my friend TreasurePirate, I do believe this Cyprus situation is vastly different than what has been going on in other cases where a bank fails and it is taken over by another bank. I do not believe it is true that here in the US in the many recent bank takeovers that account holders lost money on their uninsured deposits except in a small minority of situations. I would like to see proof of what you say about this happens all the time and has happened like this before in other places.

The Cyprus thing may not turn out bullish for PMs, but in my opinion it is HUGE in its ramifications. Further, one of the two banks this affects will stay open and remain in business after this is over. This is not simply to allow a company to go bankrupt as you had stated before. To me this is similar to when our banks failed in the depression era and the depositors got screwed. But at least then I assume the banks really did fail and were not bailed out from their failed investments (Greek debt, etc) by using the depositors money and then keep going on as business as usual, as is what is happening here according to what I have read, which may or may not be fully accurate.

All just my opinion.

Jim

I think this is all just a matter of semantics. Yes, there will be people in Cyprus who will lose 80% of their deposit. How? Well, the insured limit is 100K. So if I have 500K in the Cyprus bank then I will lose the 400K that is not insured. This is 80%. It's not hard to imagine that in a bank used by many rich Russians as a means to launder and hide money that there are quite a few accounts with 500K in them (or more). But keep in mind that anyone who has less than the insured limit will not lose their deposits.

Again, this is exactly the way it works here in the US. If you have more than the insured limit you COULD lose it. The biggest difference between Cyprus and the US is that the FDIC limit here is $250K per person ($500K for joint accounts). So the likelihood of people losing money here is smaller because fewer people in your average US bank have over $250K worth of cash sitting around. That doesn't mean people can't lose money here. But the numbers won't look as bad here because of the higher insured limit and the smaller likelihood of an individual bank catering primarily to a very rich clientele.

But the details are basically the same in both cases. If you have more than the insured limit you could lose it. And that's what is happening in Cyprus. It only looks different than what happens here in the states because of the size of the accounts and the lower limit. But the mechanisms for how the money is being lost/used are primarily the same. One big difference is that the priority of creditors appears to be different. In the US, depositors are supposed to have the highest priority before any other creditors. But it is still possible for the numbers to be such that even depositors get screwed here in the US too. It just doesn't happen as often due to the nature of the accounts we keep here in the US and the priority we give to depositors. But we all know it COULD happen so that's why I say that it is primarily no different.

 

[TreasurePirate69]

Let me put it another way.... I think the whole reason why this is being treated as "different" is because the Cyprus banks originally pushed for a deposit tax that impacted every depositor (even those below the insured limit). People got upset at this and rightfully so which brought undue attention to the whole mess. But imagine what would have happened if they hadn't done that and had instead announced the current plan from the get go. How many pundits would you have harping about this being "different" if the original story had been: "Cyprus bank declares bankruptcy. Depositors above the insured limit could lose part of their deposit."? Most people would have said "Yep, sounds about right. That's the way it works here too." How many people would you find clamoring on and on about how this is some terrible precedent that is going to be sweeping the world? How many people would be calling this "confiscation"? Very few. After all, the general consensus is that this is the way the banking world has always worked. The attitude would have been completely different and most people would have seen it as business as usual.

So explain to me how something that most people WOULD have viewed as essentially a non-event to the rest of the world can suddenly become such a big deal just because of the timing and manner of the original announcement that no longer even holds true?

 

[TreasurePirate69]

Wikipedia has what appears to be a short, decent write up on the events:

2012?2013 Cypriot financial crisis - Wikipedia, the free encyclopedia

 

[TreasurePirate69]

Here is the latest video with Greg Hunter and Peter Schiff and Peter explains it a lot better than I coud ever hope too. He talks about the FDIC Insurance also, so listen for that. He mentions $33 billion to insure $10.8 trillion in deposits

The FDIC has just $33 billion to insure more than $10.8 trillion in deposits.

Marchas, can you repost this link? For some reason I can't click it. Thanks!

 

[TreasurePirate69]

Jim, you asked for an example of this happening in the US. Here is one I was able to find. I think that if you google for "bank receivership certificates" you may find more examples.

The example was IndyMac Federal Bank in 2008. The following statement was taken from the FDIC web site for that bank. Notice that 50% of the uninsured deposits were expected to be lost. The final number may have been less but not by much.

[FONT=arial, helvetica, sans-serif]When IndyMac was placed into Conservatorship in July of 2008, the FDIC calculated that the ultimate resolution of IndyMac would result in a recovery of approximately 50% of the uninsured deposits of IndyMac. Based upon that estimate, an advance dividend in that amount was paid to the uninsured depositors at that time. The announced sale of IndyMac to IMB Management Holdings is consistent with the original estimate and no additional dividend will be paid as a consequence of this sale. While no dividends for the uninsured depositors are anticipated at this time, the FDIC will continue to periodically re-assess the financial condition of the receivership to determine if there is additional cash for dividend distributions.
[/FONT]

 

[TreasurePirate69]

Actually, here is a whole list of examples:

FDIC: FDIC Dividends from Failed Banks

Select "all banks" from the Current Dividends drop down list. The column labeled Total Paid is the percentage of what was recovered by depositors. Many are only around 60% implying a loss of 40% for most depositors. Some are as low as 20% meaning an 80% loss. The numbers are all over the place but I think this is conclusive evidence that hundreds of banks have failed since 2000 in the US and uninsured depositors have lost a lot of money.

 

[jim4silver]

Actually, here is a whole list of examples:

FDIC: FDIC Dividends from Failed Banks

Select "all banks" from the Current Dividends drop down list. The column labeled Total Paid is the percentage of what was recovered by depositors. Many are only around 60% implying a loss of 40% for most depositors. Some are as low as 20% meaning an 80% loss. The numbers are all over the place but I think this is conclusive evidence that hundreds of banks have failed since 2000 in the US and uninsured depositors have lost a lot of money.

The Cyprus situation is distinguishable from what has happened in US bank closures on two grounds; first, in the US situation, the banks were dissolved and all their assets sold off and the remains divided among creditors, including those with provable uninsured bank deposits, as your link states. In Cyprus, of the two banks affected, the smaller one was in a sense merged into the larger one which will remain going on business as usual. From what I understand, there is no closure and no sale of assets of the larger remaining bank to satisfy any debts, etc. I am basing this on the articles I have read so I cannot substantiate their veracity.

Second, here in the US, it is possible to have more than one account insured to the full limit if you follow the correct rules by having them in different banks, etc. I don't know the current FDIC rules because I believe there was a change not too long ago, but I believe a person can have more than one account insured up to $250K if they have the accounts properly set up. In the Cyprus case, it was 100K Euros per customer, no matter how they were set up. Thus, here in the US, if a person gets to the point they are having uninsured money lost in their accounts, most likely they have multiples of $250K they didn't lose, which while losing any is bad, it is still far different than the Cyprus situation.

Jim

 

[TreasurePirate69]

The Cyprus situation is distinguishable from what has happened in US bank closures on two grounds; first, in the US situation, the banks were dissolved and all their assets sold off and the remains divided among creditors, including those with provable uninsured bank deposits, as your link states. In Cyprus, of the two banks affected, the smaller one was in a sense merged into the larger one which will remain going on business as usual. From what I understand, there is no closure and no sale of assets of the larger remaining bank to satisfy any debts, etc. I am basing this on the articles I have read so I cannot substantiate their veracity.

Second, here in the US, it is possible to have more than one account insured to the full limit if you follow the correct rules by having them in different banks, etc. I don't know the current FDIC rules because I believe there was a change not too long ago, but I believe a person can have more than one account insured up to $250K if they have the accounts properly set up. In the Cyprus case, it was 100K Euros per customer, no matter how they were set up. Thus, here in the US, if a person gets to the point they are having uninsured money lost in their accounts, most likely they have multiples of $250K they didn't lose, which while losing any is bad, it is still far different than the Cyprus situation.

Jim

I agree on all points. So the question is.... now that you have taken the time to delve into the finer details of the problem do you still have the same level of concern that you did before? Do you still feel that this was something completely unprecedented or do you agree that what happened is very similar (other than the two finer points you made) to what has been going on for many years in many countries?

By the way, on your first point I agree that one bank will be disolved and the other will remain. However, I do believe that they will attempt to sell off the "bad debts and obligations" to try and repay some creditors. I don't have any exact information on this but I do believe it makes sense. There is no reason not to try and sell these to recoup some losses. Whether or not those funds then go to pay off creditors (including depositors) is another matter.