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View Diary: Bank Run in Cyprus, Will it Spread to Southern Europe? (322 comments)

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  •  How does this enrich big banks? (1+ / 0-)
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    Your reply will take some imagination.

    The Euros pony up $13 billion to recapitalize the puny Cyprus banks and those banks' shareholders get drastically diluted.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Sun Mar 17, 2013 at 03:16:22 PM PDT

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    •  Which ones will be left standing? (0+ / 0-)
    •  If the banks are puny, why not let them fail? (1+ / 0-)
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      Do you think that $13 billion is not to be repaid?  Is there no interest upon that money?  Is there no percentage cut for arranging the deal for the funding banks? Seriously? Since when did banks hand over money - billions - for free?  Only the US government does that!  (This refers to the German banks as being the big banks, not Cyprus, btw)

      And, apparently, the haircut on depositors -- not the banks' investors, mind you -- will raise an immediate $5.8 billion.

      Almost a year ago, Cyprus projected its needs at 17 bln euros, which is nearly the value of the country's annual output (~18 bln euros).  However, the deal worked out is for only 10 bln euros and even that will be largely paid by domestic parties.  Therein lies the most controversial elements.  

      There will be an immediate tax on depositors in Cyprus.  Large deposits, which are defined as in excess of 100k euros, will lose 9.9%.  The government will take 6.75% from small depositors.    This is expected to raise 5.8 bln euros.  

      Broke a Cardinal Rule

      Depositors are not at fault for what banks owners and management decide to do, particularly not the small savings accounts who are hit with an immediate 6.75% confiscation.  The shareholders of the Cypriot banks should take ALL the hit without hitting the small savers particularly.

      But the owners just convert the depositors' money to their own in this case and use it to fund their own bailout.  Their "dilution" is lessened by about $5.8 billion euros.  A $5.8 billion euro transfer from working folks to the ownership class.

      There were multiple reports which indicated that Germany told Cyprus: Confiscate your depositors' money or leave the Eurozone.
      Amazing how that works, isn't it? All those with savings accounts thought that their money was theirs. Instead, German banks decided it wasn't.  Incredibly message to send, really.

      "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

      by YucatanMan on Sun Mar 17, 2013 at 11:59:07 PM PDT

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    •  Everyone agrees on what's happening: (2+ / 0-)
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      nchristine, Cliss

      Wall Street Journal:

      Cyprus is finally getting a bailout, and what an instant classic of euro-crisis dysfunction it is. Nine months after Nicosia first requested a rescue, the deal that emerged Saturday is slapdash, short-sighted and manhandled by politics.

      The novelty of Saturday's deal is that, for the first time in the euro crisis, depositors will contribute to the cost of recapitalizing banks. As we went to press, the plan was for Nicosia to extract €5.8 billion via a one-off 9.9% "stability levy" on deposits larger than €100,000 and a 6.75% levy on deposits smaller than that. The International Monetary Fund will pitch in €1 billion, and the European Stability Mechanism lends the rest, for a total of €10 billion.

      Recapitalizing the banks -- is that the job of the small savers?  When the banks are profitable again, are the small savers going to receive large checks?  hahaha

      By the way, these small savers -- under 100,000 euros -- are in guaranteed accounts.  How do one explain "your account is guaranteed up to 100,000, but oh! we've taken nearly 7% anyway?"

      Same link as above:

      ... by apparently sparing senior bank bondholders, the euro zone has again shown that no principle is above political meddling. The cleaner solution would have been a 20% haircut on deposits over €100,000, with writedowns on all bank debt. This would have respected creditor hierarchy and, by not trampling on deposit insurance, honored the rule of law.
      But no, can't have that pesky rule of law getting in the way when bank bondholders are to be protected.

      See what I mean?  Little people have to sacrifice so the big people don't.  Real nice.

      Speculation of global implications?  Not sure about that, but this blatant money-grab is roiling the waters.

      "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

      by YucatanMan on Mon Mar 18, 2013 at 12:08:50 AM PDT

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