I wonder if this will affect PM prices in Europe

[jim4silver]

Just saw this today. EU bank customers may face bail ins if this new law goes through according to the linked article. I know Canada is supposedly going to pass a law as well allowing bail ins. I wonder where else such laws will be passed?


EU bank customers to contribute to bail-ins? | euronews, economy


Canada Includes Depositor Haircut Bail-In Provision For Systemically Important Banks in 2013 Budget! | SilverDoctors.com


Jim

 

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[Marchas45]

I don't know about it affecting the PM prices but it will sure affect the withdrawals. LMAO

 

[TreasurePirate69]

I don't get this obsession with the "evils" of bank bail-ins. At no point has anyone who was under the insured limit lost money. If you are over the insured limit then you already know you could lose your funds. A bank bail-in (as these countries are implementing it) simply says that depositors no longer get top priority when paying off creditors. Their goal is to pay off the important creditors first so that they don't get a chain of banks failing causing other depositors at other banks to lose out as well. The other benefit is that the bank stays solvent so that depositors actually have a BETTER chance of keeping their deposits because the assets of the bank are worth more when they are sold. Without a bank bail-in or bail-out, those assets usually become worthless and sell for pennies on the dollar. This means that depositors actually lose MORE money because there is nothing left after the sale of assets.

So please explain to me why bank bail-ins are the all encompasing evil that so many PM bulls make them out to be? The depositor already knows that they can lose their deposits over the insured value. And as we've seen in the past, when a bank fails the assets are typically worth virtually nothing anyway. The bank bail-in provides the following benefits:

1. We can keep other banks/creditors from failing which saves depositors of other banks money.
2. We aren't bailing out the bank with tax dollars which saves all tax payers money.
3. The assets of the bank retain more value which returns much more money to depositors and creditors.

Where is the evil? Please show me because I am completely at a loss to understand this hatred. All I see is more fear mongering.

 

[jim4silver]

I don't get this obsession with the "evils" of bank bail-ins. At no point has anyone who was under the insured limit lost money. If you are over the insured limit then you already know you could lose your funds. A bank bail-in (as these countries are implementing it) simply says that depositors no longer get top priority when paying off creditors. Their goal is to pay off the important creditors first so that they don't get a chain of banks failing causing other depositors at other banks to lose out as well. The other benefit is that the bank stays solvent so that depositors actually have a BETTER chance of keeping their deposits because the assets of the bank are worth more when they are sold. Without a bank bail-in or bail-out, those assets usually become worthless and sell for pennies on the dollar. This means that depositors actually lose MORE money because there is nothing left after the sale of assets.

So please explain to me why bank bail-ins are the all encompasing evil that so many PM bulls make them out to be? The depositor already knows that they can lose their deposits over the insured value. And as we've seen in the past, when a bank fails the assets are typically worth virtually nothing anyway. The bank bail-in provides the following benefits:

1. We can keep other banks/creditors from failing which saves depositors of other banks money.
2. We aren't bailing out the bank with tax dollars which saves all tax payers money.
3. The assets of the bank retain more value which returns much more money to depositors and creditors.

Where is the evil? Please show me because I am completely at a loss to understand this hatred. All I see is more fear mongering.

Answer me this ONE question TreasurePirate: you keep saying these "bail ins" are no different than when a bank here goes under. If that is true, why are other countries and unions making new laws ALLOWING bail ins in their countries? If this is just like it has been, there would be no need for new laws.

Second, in ALL the past banks going under here, the bank goes bye bye, bankrupt, etc. In these bail ins, the bank SURVIVES without gov asst. So basically INSTEAD of going under, they stay afloat because they were bailed in by removing their liabilities (that is the money you had on deposit, it was a liability to the bank and removed when they no longer owe you).

You must understand this because you defend it but here is where your reasoning is wrong. There is no precedent for a bank/company, etc, taking deposits (called removing liabilities) then STAYING open. If a bank goes under it goes under, but these are not going under they are staying afloat. THIS IS THE DIFFERENCE!!!

I am sorry but if you don't get this you are either trying not to understand it or you get it but won't accept it. Or maybe you get it and think it is OK. That is your choice but to say you don't get it seems impossible to believe.

PS In anticipating your response, you will say that here a new bank takes over the defunct one. In these bail ins, the same bank will remain, not a new bank or another bank taking over. Just like in Cyprus, one bank "disappeared" but the other one affect stayed open, business as usual.

PSS In Cyprus, it was originally going to be a flat percentage across the boards for ALL depositors that was taken. After much righteous outrage they decided on taking over the insurance limit, which is still bad in my opnion but I guess they figured the "little guys" would shut up since their money would be safe.

Jim

 

[TreasurePirate69]

Answer me this ONE question TreasurePirate: you keep saying these "bail ins" are no different than when a bank here goes under. If that is true, why are other countries and unions making new laws ALLOWING bail ins in their countries? If this is just like it has been, there would be no need for new laws.

Second, in ALL the past banks going under here, the bank goes bye bye, bankrupt, etc. In these bail ins, the bank SURVIVES without gov asst. So basically INSTEAD of going under, they stay afloat because they were bailed in by removing their liabilities (that is the money you had on deposit, it was a liability to the bank and removed when they no longer owe you).

You must understand this because you defend it but here is where your reasoning is wrong. There is no precedent for a bank/company, etc, taking deposits (called removing liabilities) then STAYING open. If a bank goes under it goes under, but these are not going under they are staying afloat. THIS IS THE DIFFERENCE!!!

I am sorry but if you don't get this you are either trying not to understand it or you get it but won't accept it. Or maybe you get it and think it is OK. That is your choice but to say you don't get it seems impossible to believe.

PS In anticipating your response, you will say that here a new bank takes over the defunct one. In these bail ins, the same bank will remain, not a new bank or another bank taking over. Just like in Cyprus, one bank "disappeared" but the other one affect stayed open, business as usual.

PSS In Cyprus, it was originally going to be a flat percentage across the boards for ALL depositors that was taken. After much righteous outrage they decided on taking over the insurance limit, which is still bad in my opnion but I guess they figured the "little guys" would shut up since their money would be safe.

Jim

Ok... let me start off by saying that any argument made in the past is irrelevant to the current discussion. I have NEVER said that a bail-in is EXACTLY the same as what we have always had. What I DID say was that it wasn't that much different (you disagreed). My point was that people were acting like a bank bail-in was the end of the banking world as we knew it because depositors were suddenly able to lose money. I showed that depositors had ALWAYS been able to lose money and that the only difference was that with a bank bail-in depositors were POTENTIALLY not being put first as creditors. But the risk to lose money was always there. With all of that said, it really doesn't matter in our current discussion. I concede that bank bail-ins are different than bank bail-outs or past bank failures. So we can move on from that point.

I agree in part with your second point. It is possible for a bank to stay afloat through a bank bail-in by removing some of its liabilities. However, it is not guaranteed that the bank will stay afloat. In the case of Cyprus, one bank was closed while the other was able to stay open and was strengthened. It is also possible for an individual bank to be closed even after a bank bail-in. Additionally, a bank bail-in does not necessarily put depositors last on the list of creditors. Keep in mind that it is possible with a bank bail-in for depositors to still be put first and other creditors to lose money. This is the Dodd Frank form of bank bail-in. There are clearly other forms of bank bail-in and I find it hard to believe that the PM bulls and fear mongering pundits have read all of the details of each of the bills being approved by each country before bashing them all. I think a lot of assumptions are being made with the mindset that bankers and politicians are corrupt and only have their own best interests in mind. The true theory behind a bank bail-in is to try and maximize depositor and creditor returns while limiting the risk of systemic failures in other banks.

So... I believe the crux of YOUR argument is that it is unfair that a bank should remain afloat at the cost of the depositors. I think this is misguided for the following reasons. Keep in mind that there are three possible techniques that could be used to handle such a scenario: bank failure (bankruptcy), bank bail-out, bank bail-in.

1. These depositors had more than the insured limit. Regardless of which of the three techniques you use, the depositor knows that any or all of their uninsured money could be lost. They know this going in so it should be no surprise to them if they lose money. It doesn't make it fair. But it also doesn't mean that this is some "new evil policy". They have always known the risks.

2. If we use the bank failure/bankruptcy method, the assets of the bank will be worth virtually nothing because no one wants to pay good money for bankruptcy assets. In this case, the depositors will likely get LESS money back from the other two methods. In addition, any other bank or creditor that was owed money may fail as well. In the case of other banks you get a domino effect and even more depositors lose money. The net result is a destroyed banking system with depositors across the board losing a significant amount of their deposits. This includes depositors who didn't even have money at the original failed bank. The up side is that those darn bankers get taught a lesson. So you get to sleep well knowing that those banks were allowed to fail. But regardless, it happens at the depositors' expense. Most governments don't want this to happen. Hopefully you agree that this is not a good way to do things.

3. If a bank bail-out is used, then the tax payers are on the hook. The depositors may not lose as much money but they lose it in tax dollars anyway. In this case we are robbing Peter to pay Paul. And in the end, that bank STILL stayed open. So the bankers get rewarded for their behavior and the tax payer gets to foot the bill. There are some benefits and drawbacks. Perhaps you think this is better than a bank bail-in. But in the end the bank still stays open so this doesn't help your argument.

4. In a bank bail-in the order of creditors is selected in order to try and keep the bank's assets as high as possible while the issue is being resolved. The bank may or may not stay open. But what they are attempting to do is limit the impact of the bank's insolvency on other banks and industries as well as on depositors. The more the assets are worth, the more those depositors may get back in the end. It is NOT a given that depositors will lose more money this way. It simply can't be known. And even if the depositors of the first bank lose a significant amount of money, it may be the case that depositors at other banks don't lose a dime. Overall, the amount of depositor money lost can be less with a bank bail-in than with an outright bankruptcy. And the amount of taxpayer dollars used is definitely less.

5. But... that bank stayed open! The evils of it all! Well, I don't see a better option. In a perfect world the bankers would go to jail and would not remain open. But clearly, letting the bank declare bankruptcy doesn't solve anything. Depositors still lose money (probably way more than the other two methods) and not just the bank's depositors. The whole system could collapse. So you have to decide what is important to you.... do you want to punish those darn bankers by closing them down? Or do you want to try and save as much depositor money as possible?

6. You might be saying.... well why can't depositors be first on the list of creditors like we do here in the US? No one said that they can't be first or even close to the top of the list with a bank bail-in strategy. It just depends on how they want to do it. Just keep in mind that if the depositors are GUARANTEED to be first, then you can't prioritize creditors for the good of all. This is the point of the legislation. They want the flexibility to be able to decide on a plan that saves the most depositor and creditor money while keeping the whole system afloat. Why would that be bad? Forget the bankers. We aren't trying to prioritize for their sake. But having the flexibility to let another harmless bank get paid off so that the depositors of that bank don't lose their shirts is potentially a good thing. And making sure the whole banking system doesn't collapse because of one bank may save countless depositors money. You need to consider that the "needs of the few are outweighed by the needs of the many". Also, keep in mind that these same depositors likely have money at other banks too. By getting rid of bank bail-ins you might save them $1000 in the failing bank but could cost them $10,000 in deposits in other banks when multiple banks fail. There is no way to know for sure. You just have to do the best you can do. And having that flexibility isn't "evil" or some grand scheme to try and bilk depositors out of millions while keeping the banks afloat.

Don't get me wrong, I don't like bankers any more than the next guy. But instead of bashing bank bail-ins I think it makes more sense to ask for legislation that criminalizes bad banking behavior. Let's put the bad bankers in jail and keep as much of the depositors' money as we can. The fear of bank bail-ins is misguided. The pundits are spreading rumors about what they are and how they are designed to hurt depositors and help the bankers. This is simply not the case. The goal is to try and SAVE depositor money by not letting multiple banks fail and by prioritizing creditors so that the bank's assets are sold at a much higher value. This returns money to depositors in the end.

 

[jim4silver]

Ok... let me start off by saying that any argument made in the past is irrelevant to the current discussion. I am not (and have NEVER) said that a bail-in is EXACTLY the same as what we have always had. What I DID say was that it wasn't that much different (you disagreed). My point was that people were acting like a bank bail-in was the end of the banking world as we knew it because depositors were suddenly able to lose money. I showed that depositors had always lost money and that the only difference was that with a bank bail-in depositors were POTENTIALLY not being put first as creditors. But the risk to lose money was always there. With all of that said, it really doesn't matter in our current discussion. I concede that bank bail-ins are different than bank bail-outs or past bank failures. So we can move on from that point.

I agree in part with your second point. It is possible for a bank to stay afloat through a bank bail-in by removing some of its liabilities. However, it is not guaranteed that the bank will stay afloat. In the case of Cyprus, one bank was closed while the other was able to stay open and was strengthened. It is also possible for an individual bank to be closed even after a bank bail-in. Additionally, a bank bail-in does not necessarily put depositors last on the list of creditors. Keep in mind that it is possible with a bank bail-in for depositors to still be put first and other creditors to lose money. This is the Dodd Frank form of bank bail-in. There are clearly other forms of bank bail-in and I find it hard to believe that the PM bulls and fear mongering pundits have read all of the details of each of the bills being approved by each country before bashing them all. I think a lot of assumptions are being made with the mindset that bankers and politicians are corrupt and only have their own best interests in mind. The true theory behind a bank bail-in is to try and maximize depositor and creditor returns while limiting the risk of systemic failures in other banks.

So... I believe the crux of YOUR argument is that it is unfair that a bank should remain afloat at the cost of the depositors. I think this is misguided for the following reasons. Keep in mind that there are three possible techniques that could be used to handle such a scenario: bank failure (bankruptcy), bank bail-out, bank bail-in.

1. These depositors had more than the insured limit. Regardless of which of the three techniques you use, the depositor knows that any or all of their uninsured money could be lost. They know this going in so it should be no surprise to them if they lose money. It doesn't make it fair. But it also doesn't mean that this is some "new evil policy". They have always known the risks.

2. If we use the bank failure/bankruptcy method, the assets of the bank will be worth virtually nothing because no one wants to pay good money for bankruptcy assets. In this case, the depositors will likely get LESS money back from the other two methods. In addition, any other bank or creditor that was owed money may fail as well. In the case of other banks you get a domino effect and even more depositors lose money. The net result is a destroyed banking system with depositors across the board losing a significant amount of their deposits. This includes depositors who didn't even have money at the original failed bank. The up side is that those darn bankers get taught a lesson. So you get to sleep well knowing that those banks were allowed to fail. But regardless, it happens at the depositors' expense. Most governments don't want this to happen. Hopefully you agree that this is not a good way to do things.

3. If a bank bail-out is used, then the tax payers are on the hook. The depositors may not lose as much money but they lose it in tax dollars anyway. In this case we are robbing Peter to pay Paul. And in the end, that bank STILL stayed open. So the bankers get rewarded for their behavior and the tax payer gets to foot the bill. There are some benefits and drawbacks. Perhaps you think this is better than a bank bail-in. But in the end the bank still stays open so this doesn't help your argument.

4. In a bank bail-in the order of creditors is selected in order to try and keep the bank's assets as high as possible while the issue is being resolved. The bank may or may not stay open. But what they are attempting to do is limit the impact of the bank's insolvency on other banks and industries as well as on depositors. The more the assets are worth, the more those depositors may get back in the end. It is NOT a given that depositors will lose more money this way. It simply can't be known. And even if the depositors of the first bank lose a significant amount of money, it may be the case that depositors at other banks don't lose a dime. Overall, the amount of depositor money lost can be less with a bank bail-in than with an outright bankruptcy. And the amount of taxpayer dollars used is definitely less.

5. But... that bank stayed open! The evils of it all! Well, I don't see a better option. In a perfect world the bankers would go to jail and would not remain open. But clearly, letting the bank declare bankruptcy doesn't solve anything. Depositors still lose money (probably way more than the other two methods) and not just the bank's depositors. The whole system could collapse. So you have to decide what is important to you.... do you want to punish those darn bankers by closing them down? Or do you want to try and save as much depositor money as possible?

6. You might be saying.... well why can't depositors be first on the list of creditors like we do here in the US? No one said that they can't be first or even close to the top of the list with a bank bail-in strategy. It just depends on how they want to do it. Just keep in mind that if the depositors are GUARANTEED to be first, then you can't prioritize creditors for the good of all. This is the point of the legislation. They want the flexibility to be able to decide on a plan that saves the most depositor and creditor money while keeping the whole system afloat. Why would that be bad? Forget the bankers. We aren't trying to prioritize for their sake. But having the flexibility to let another harmless bank get paid off so that the depositors of that bank don't lose their shirts is potentially a good thing. And making sure the whole banking system doesn't collapse because of one bank may save countless depositors money. You need to consider that the "needs of the few are outweighed by the needs of the many". Also, keep in mind that these same depositors likely have money at other banks too. By getting rid of bank bail-ins you might save them $1000 in the failing bank but could cost them $10,000 in deposits in other banks when multiple banks fail. There is no way to know for sure. You just have to do the best you can do. And having that flexibility isn't "evil" or some grand scheme to try and bilk depositors out of millions while keeping the banks afloat.

Don't get me wrong, I don't like bankers any more than the next guy. But instead of bashing bank bail-ins I think it makes more sense to ask for legislation that criminalizes bad banking behavior. Let's put the bad bankers in jail and keep as much of the depositors' money as we can. The fear of bank bail-ins is misguided. The pundits are spreading rumors about what they are and how they are designed to hurt depositors and help the bankers. This is simply not the case. The goal is to try and SAVE depositor money by not letting multiple banks fail and by prioritizing creditors so that the bank's assets are sold at a much higher value. This returns money to depositors in the end.

It's OK that you find the bail ins acceptable. I don't think it is fair. Such things are NOT allowed by the US bankruptcy code. Basically a "bail in" is like a Chapter 7, but the dead beat gets to keep his $h!* after removing the debt.

That is why countries need to make NEW laws allowing bail ins (at least the EU, Canada and the US-should our leaders decide that is the way to go).

I am done debating this issue. Carry on.

Jim

 

[TreasurePirate69]

Another thing I'll add is that bank bail-ins are not really in the favor of banks and politicians. If you want to know the method that favors the banks and the politicians most then look no further than the bail-out. If politicians were really trying to do their banking buddies a favor they wouldn't pass any legislation at all. They would just keep bailing them out. After all, neither the politicians nor the banks suffer at all with a bank bail-out. The taxpayer suffers. The fact that they are trying to pass bail-in legislation should be a sign that they don't want to keep rewarding the banks and instead want the flexibility to do the best thing possible for the economy and the depositors.

 

[TreasurePirate69]

It's OK that you find the bail ins acceptable. I don't think it is fair. Such things are NOT allowed by the US bankruptcy code. Basically a "bail in" is like a Chapter 7, but the dead beat gets to keep his $h!* after removing the debt.

That is why countries need to make NEW laws allowing bail ins (at least the EU, Canada and the US-should our leaders decide that is the way to go).

I am done debating this issue. Carry on.

Jim

That's it? You don't agree or disagree with anything I've said?

Whether or not the "dead beat gets to keep his $hi*" is clearly the underlying issue with you. So explain to me a way to punish the banks that doesn't ultimately hurt the depositors and economy even more.... Sometimes you can end up cutting off your nose to spite your face. Have I changed your mind at all about how bail-ins are not some evil scheme concocted by banks to rip people off? Or are you still of the opinion that the pundits are right and bail-ins are pure evil?

 

[jim4silver]

That's it? You don't agree or disagree with anything I've said?

Whether or not the "dead beat gets to keep his $hi*" is clearly the underlying issue with you. So explain to me a way to punish the banks that doesn't ultimately hurt the depositors and economy even more.... Sometimes you can end up cutting off your nose to spite your face. Have I changed your mind at all about how bail-ins are not some evil scheme concocted by banks to rip people off? Or are you still of the opinion that the pundits are right and bail-ins are pure evil?

Since you request a response here you go. No I don't agree with you. I respect your opinion. To me it boils down to who should suffer the loss. And I don't think it is a planned scheme to rip people off, but instead is an unfair manner of allowing a bank or financial institution to get rid of debt or cover losses.

First of all, I am not for tax payer bailouts, even though they allege that the US somehow made a profit on the deal via interest paid to them. Whether or not that is true I do not support tax payer bailouts.

However, I am even more against taking depositors' money (I know it is not actual cash, but is a right to collect by the depositor) by the bank to cover their "losses" somehow, while the bank stays afloat, the execs keep their jobs and bonuses, etc., the stock of the bank still exists although would probably have taken a huge hit in the process, but on the bail in news would surely make its value go way up, thus the shareholders don't lose.

The point is, the most "innocent" parties involved in the bank process are the depositors (I don't care if they keep more than the insurance limit). If they are the ones taking the hit while all other parties lose nothing, it is akin to theft to me. To steal from an old saying in part , it is like "two wolves and a sheep voting on what's for lunch" except in this case the sheep loses.

You seem to act like a bank needing bail out/in money is some random virus that strikes banks out of thin air. But the truth is that for the banks to get into that kind of problem (most of the time) it is due to poor investments or risky investing, etc. In other words there is some blame to place for its cause. Thus, those having control over the bank and who own stock should take all the losses before a depositor's money is even considered in my opinion. I know my view may not reflect what the law is, I am simply stating what I think is fair.

Bottom line if a business is failing, let it fail. If depositors lose because the whole bank goes under that is the risk they take. In that instance though I am talking about where an entity files for bankruptcy and is dissolved. But to let all the responsible parties skate and punish the most innocent parties involved is wrong from an equitable standpoint.

In closing, that is why the countries who want to do bail ins need to pass laws allowing them. If it were legal now they would not need new laws. It is not legal now because it is not equitable and closely resembles theft. They can make new laws saying it is legal but that doesn't make it right.

Just my opinion.

Jim

 

[usandthem]

^ What he said.

 

[FreedomUIC]

I like Silver.

 

[TreasurePirate69]

Since you request a response here you go. No I don't agree with you. I respect your opinion. To me it boils down to who should suffer the loss. And I don't think it is a planned scheme to rip people off, but instead is an unfair manner of allowing a bank or financial institution to get rid of debt or cover losses.

First of all, I am not for tax payer bailouts, even though they allege that the US somehow made a profit on the deal via interest paid to them. Whether or not that is true I do not support tax payer bailouts.

However, I am even more against taking depositors' money (I know it is not actual cash, but is a right to collect by the depositor) by the bank to cover their "losses" somehow, while the bank stays afloat, the execs keep their jobs and bonuses, etc., the stock of the bank still exists although would probably have taken a huge hit in the process, but on the bail in news would surely make its value go way up, thus the shareholders don't lose.

The point is, the most "innocent" parties involved in the bank process are the depositors (I don't care if they keep more than the insurance limit). If they are the ones taking the hit while all other parties lose nothing, it is akin to theft to me. To steal from an old saying in part , it is like "two wolves and a sheep voting on what's for lunch" except in this case the sheep loses.

You seem to act like a bank needing bail out/in money is some random virus that strikes banks out of thin air. But the truth is that for the banks to get into that kind of problem (most of the time) it is due to poor investments or risky investing, etc. In other words there is some blame to place for its cause. Thus, those having control over the bank and who own stock should take all the losses before a depositor's money is even considered in my opinion. I know my view may not reflect what the law is, I am simply stating what I think is fair.

Bottom line if a business is failing, let it fail. If depositors lose because the whole bank goes under that is the risk they take. In that instance though I am talking about where an entity files for bankruptcy and is dissolved. But to let all the responsible parties skate and punish the most innocent parties involved is wrong from an equitable standpoint.

In closing, that is why the countries who want to do bail ins need to pass laws allowing them. If it were legal now they would not need new laws. It is not legal now because it is not equitable and closely resembles theft. They can make new laws saying it is legal but that doesn't make it right.

Just my opinion.

Jim

Jim, I sincerely appreciate you taking the time to respond despite the fact that you really didn't want to continue this conversation. Although I still disagree with you and would love to post counter arguments, doing so could jeopardize the harmony of the board. So I will let it drop.

As always, you provide interesting, intelligent, and well thought out arguments. And you do so without being condescending or argumentative. That is a rare trait these days on forums that are frequented by members with such diverse opinions. I truly appreciate the chance to have these discussions with you. One of the benefits of such discussions is the chance to really test my convictions and deepen my understanding of the issues at hand.

Thanks.

 

[Marchas45]

I also respect you Pirate as you don't go overboard when someone gives a different opinion than yours, you tend Not to get argumentative and back off when you think it's necessary. Hats of to you. Charlie.