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Eighty Four, PA | Follow-up on a recent post...an e-mail from my brother...
FDIC insurance has been changed in a quiet way - most folks have no idea.
Up to very recently (November 2014) the Federal Deposit Insurance Corporation insured money sitting in your bank checking and savings account for up to $250,000. This helped a lot of people go to sleep at night.
Some of this insurance is still in place, but things have changed. You see, the FDIC doesn't have enough funding to cover all the accounts that it insures. If some big crisis suddenly wiped out a bunch of large banks, claims would overwhelm the FDIC. In theory, Congress would increase the FDIC's funding so as to cover the losses, but what if Congress would not or could not, cover the FDIC? As an example, suppose that Congress has more important things to do, such as to respond to a sudden massive military sneak attack, or to address a large man-made or natural disaster, or some other crisis?
Some folks in Congress have been thinking about this shortage in FDIC funding, and what they came up with is called a "Bail In". A "Bail In" is the opposite of a "Bail Out". With a "Bail Out", Congress would refund the FDIC in a crisis by transferring taxpayer money - huge amounts of it - to the FDIC, so as to make the bank customers whole again. Taxpayer money. All citizens are then taxed to cover the banks' losses - the burden of the bank managers mistakes - are thus spread across the entire population of America.
But with a "Bail In", Congress isolates the burden to only the customers of the affected banks. Without asking your permission, Congress simply takes the bank customers' money away from them, and gives that money to the failing banks, so as to prop them up. The banks then gives their customers shares of the bank's stock equal to the cash that is being taken out of their accounts. That's how a "Bail In" works. You have no say in this at all! The burden of the failure of the bank loan managers, is placed entirely on the backs of the bank customers!
So, here’s what can happen to your very own bank cash deposits in the next banking crisis.
If your too-big-to-fail (TBTF) bank (such as Wells Fargo, Citibank, Bank of America, etc.) is actually failing because they can’t pay off some derivative bets they made, (such as making loans to oil companies going in to fracking last year, and now those oil companies can't pay off their loan payments because the price of their oil is 'way below what they thought they would be getting;)
And - for some reason Congress refuses to bail your TBTF bank out using tax dollars -
Under a mandate titled “Adequacy of Loss–Absorbing Capacity of Global Systemically Important Banks in Resolution,” approved on Nov. 16, 2014, by the G20’s Financial Stability Board,
They can take your deposited cash money out of your bank account and turn it into shares of equity capital to try and keep your TBTF bank from failing!
When that happens, you no longer have cash in your bank account!
http://dailyreckoning.com/are-you-prepared-for-a-us-bank-bail-in/
Instead, you now own shares of stock in that bank (!) In order to get cash to live on, you'll first need to sell the stock in the open markets!
And the cash value of your stock, of course, will vary minute by minute, according to the stock markets as they change value throughout the trading day. Think about this, boys & girls! Not only are you suddenly in the stock market with all your funds, but if the markets are in turmoil at the time, you may not be able to sell that stock for cash to live on, and - if "the government" shuts down the stock exchanges for whatever reason - a tumult in the markets that violates already-existing "circuit breaker" stops, can stop trading for hours, days or weeks.
Suppose you need to make a mortgage payment at that time? Or a payment to the tax collector? Too bad! You see, we just can't allow those Big Banks to fail right now... sorry 'bout that!
These “laws” already exist today, folks, and the general public - we who are busy making a living and don't have time to read over the meeting minutes of obscure Congressional banking committees - has no idea that access to their cash deposits can now be restricted or that their deposits can actually be confiscated as part of a big bank “bail-in” to try and save the big banks from shutting down!
Oh, and don’t think that it’s safe to pull your cash out of your bank account today and put it into your bank safe-deposit box, down the street at your friendly bank branch office. Because your bank, under government orders, can legally confiscate cash and valuables stored in your bank safe deposit boxes.
And in these strange times, don't think that your own bank can't fail! Lehman Brothers, a 136 year-old bank, and Bear Stearns, 85 years old, failed in 2008 along with dozens of other "blue chip" financial firms. Overnight!
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Too Big To Fail
