Financial podcasts have been featuring ominous headlines lately along the lines of “Your Bank Can Legally Seize Your Money” and “Banks Can STEAL Your Money?! Here’s How!” The reference is to “bail-ins:” the provision under the 2010 Dodd-Frank Act allowing Systemically Important Financial Institutions (SIFIs, basically the biggest banks) to bail in or expropriate their creditors’ money in the event of insolvency. The problem is that depositors are classed as “creditors.” So how big is the risk to your deposit account? Part I of this two part article will review the bail-in issue. Part II will look at the derivatives risk that could trigger the next global financial crisis.
From Bailouts to Bail-Ins
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors, through an “orderly resolution” plan known as a “bail-in.”
The point of an orderly resolution under the Act is not to make depositors and other creditors whole. It is to prevent a systemwide disorderly resolution of the sort that followed the Lehman Brothers bankruptcy in 2008. Under the old liquidation rules, an insolvent bank was actually “liquidated”—its assets were sold off to repay depositors and creditors.
Continue readingFiled under: Ellen Brown Articles/Commentary | Tagged: bail-in, bailout, Bank of North Dakota, bank runs, Dodd-Frank, Ellen Brown, FDIC, Federal Reserve, public banking, quantitative easing, systemic risk | 24 Comments »
WEB OF DEBT BLOG 
Banking Crisis 3.0: Time to Change the Rules of the Game
On CNN March 14, Roger Altman, a former deputy Treasury secretary in the Clinton administration, said that American banks were on the verge of being nationalized:
The deposit base of the financial system has not actually been nationalized, but Congress is considering modifications to the FDIC insurance limit. Meanwhile, one state that does not face those problems is North Dakota, where its state-owned bank acts as a “mini-Fed” for the state. But first, a closer look at the issues.
Continue reading →Filed under: Ellen Brown Articles/Commentary | Tagged: Bank of North Dakota, banking crisis, banks, economy, Ellen Brown, FDIC, Fed, Federal Reserve, nationalization, public banking, SIGNATURE BANK, SILICON VALLEY BANK | 4 Comments »