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Offline RE

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Bail-Ins: It's not your Money
« on: April 13, 2013, 09:42:04 PM »
Since Bail-Outs don't seem to work here, the latest in paradigms to keep the financial system from imploding is the BAIL-IN.  Newzpeak for STEALING depositor money to pay off the bad bets of Banksters and keep the Bonuses Flowing. Starting this thread off with one from Michael Chussodovsky and James Corbett of Global Research.

RE

Bail-in and the Confiscation of Bank Deposits: The Birth of the New Financial Order

<a href="http://www.youtube.com/v/db6KVk0Tksg?feature=player_embedded" target="_blank" class="new_win">http://www.youtube.com/v/db6KVk0Tksg?feature=player_embedded</a>

The recent bail-in in Cyprus has given the world a glimpse at the future of the banking landscape. Now, as Canada gets set to hardwire the bail-in process into law, analysts like Michel Chossudovsky are warning how the big banks can use this template to further consolidate their monopoly of economic control. This is the GRTV Backgrounder on Global Research TV.
 


Those who follow the markets closely know that, at base, the current financial system is founded not on the bedrock of sound economic principles but instead upon the quicksand of public perception. All it takes is one large bump in the road to upset even the largest of economic bandwagons and usher in a new financial paradigm.
 
In the ongoing meltdown of the European Union, perhaps the greatest single bump in the road so far just took place in Cyprus. In the immediate aftermath of the dramatic bank holiday and bail-in events of last month, many in the financial media began asking whether Cyprus represents a template for future bail-ins across the European Union or elsewhere around the globe.
 
If we are going to seriously ask this question, however, it is vital that we understand exactly what happened, and what kind of template this might represent.
 


The crisis in the Cyprus banking sector has been building for years, as the small island nation’s banks began to account for a greater and greater share of its economy. The trigger event causing the recent crisis, however, was—appropriately enough—the result of a meltdown elsewhere in the Eurozone, in Greece.
 
After months of negotiations, the government of Cyprus announced it was on the verge of a 10 billion Euro bailout deal with the so-called “troika” of the EU, the ECB and the IMF. But when details of the plan emerged, including the fact that it had the confiscation of both insured and uninsured bank deposits baked into the cake, protests erupted around the country.
 
The final deal ended up keeping deposits under 100,000 Euros untouched, but uninsured deposits were restructured, wiping out the savings and cash flow of foreign depositors and local businesses alike.
 
For many, the question is whether this will be a template for future banking crises in the European Union and elsewhere. When Jeroen Dijsselbloem, president of the Eurogroup, intimated this was something that would be considered in future bailouts in an interview with Reuters and the Financial Times, markets panicked, causing Dijsselbloem to issue an immediate retraction of his recorded statements.
 
The truth, however, is that this idea has already been discussed for years in the highest circles of the international banking sector. In 2010 the Bank for International Settlements issued a white paper on possible bail-ins of Tier 1 and Tier 2 bank capital in the event of future banking crises. The proposal was discussed in further detail by groups like the Financial Stability Board and private sector entities like KPMG, which issued a July 2012 report on the possibility of future banking bail-ins.
 
During the midst of the Cyprus scandal, the government of Canada released its own proposed budget for the coming year, including language that suggests a bail-in regime:
 
“The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.”
 
In response to public furore over the proposal, Canada’s Finance Minister was forced to come out last week to deny that the nebulously defined “certain bank liabilities” includes consumer deposits, but refused to clarify precisely what liabilities would be covered by such language.
 
As Michel Chossudovsky—professor of economics at the University of Ottawa—explains, the real danger of the Cyprus example is not that this will be a common way of dealing with future bank stresses, but precisely the opposite. With the bail-in procedure in their arsenal, bankers and their political cronies will be able to use this weapon of financial destruction not against the “too big to jail” of the big six megabanks in America or their counterparts around the world, but against smaller credit unions and independent banks that threaten their monopoly of power.
 
As Professor Chossudovsky goes on to point out in his article on the subject, “The Confiscation of Bank Savings to ‘Save the Banks’,” it is no coincidence that this bail-in regime is being formalized first in Canada.
 
The Financial Stability Board which has been working on institutionalizing the bail-in process is an international body coordinating the work of national and international standard setting bodies for the financial sector. It sprang from the earlier Financial Stability Forum, itself a creation of the G7 in 1999, and includes bodies like the Bank for International Settlements among its member institutions.
 
The FSB is currently chaired by Mark Carney, the current Governor of the Bank of Canada who is set to take the reins of the Bank of England in July of this year in a highly unusual move. Before beginning work for the Canadian Department of Finance, Carney spent 13 years at Goldman Sachs, where he was involved in a 1998 Russian financial scandal, with Goldman advising the Russian government at the same time as it was betting against the country’s ability to repay its debt.
 
As critics like Matt Taibbi and others have exhaustively documented, Goldman Sachs has been at the heart of every major market manipulation in the US since the Great Depression, and has been the key cheerleader for the austerity measures that are currently tearing the Eurozone apart and creating the banking crises in Cyprus and other European countries.
 
The path forward on the highway toward the coming economic collapse is needless to say, perilous. Worse yet, all of the off-ramps that are being constructed to lead depositors and investors to “safety” during these difficult times are themselves false roads leading to dead ends themselves constructed by the financial oligarchy.
 
But as with every such fork in the path, there is an opportunity for the public to educate themselves about what is really happening and discover a genuine alternative route on this economic road map. The entire existence of the bail-in paradigm makes plain an uncomfortable truth that the banking establishment has tried to obscure for generations: that bank deposits are not piles of money sitting in bank vaults to be drawn upon as needed, but unsecured loans being made to banksters who use that money to gamble on exotic financial instruments that themselves are threatening to destroy the world economy.
 
Once that plain fact has been squarely confronted, the public has a decision to make: whether to continue to put their faith in the big banks that has brought this world to the economic abyss, or whether to use their money to build up genuine, thriving local economies through credit unions, alternative currencies and other financial alternatives.
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Offline RE

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Re: Bail-Ins: It's not your Money
« Reply #1 on: April 25, 2013, 05:03:45 PM »
No Bank Deposits Will Be Spared from Confiscation
By Matthias Chang
Global Research, April 24, 2013
Future Fastforward Region: Europe, USA
Theme: Global Economy 406 117 136
 735 I challenge anyone to prove me wrong that confiscation of bank deposits is legalized daylight robbery

Bank depositors in the UK and USA may think that their bank deposits would not be confiscated as they are insured and no government would dare embark on such a drastic action to bail out insolvent banks.

Before I explain why confiscation of bank deposits in the UK and US is a certainty and absolutely legal, I need all readers of this article to do the following:

Ask your local police, sheriffs, lawyers, judges the following questions:

1) If I place my money with a lawyer as a stake-holder and he uses the money without my consent, has the lawyer committed a crime?

2) If I store a bushel of wheat or cotton in a warehouse and the owner of the warehouse sold my wheat/cotton without my consent or authority, has the warehouse owner committed a crime?

3) If I place monies with my broker (stock or commodity) and the broker uses my monies for other purposes and or contrary to my instructions, has the broker committed a crime?

I am confident that the answer to the above questions is a Yes!

However, for the purposes of this article, I would like to first highlight the situation of the deposit / storage of wheat with a warehouse owner in relation to the deposit of money / storage with a banker.

First, you will notice that all wheat is the same i.e. the wheat in one bushel is no different from the wheat in another bushel. Likewise with cotton, it is indistinguishable. The deposit of a bushel of wheat with the warehouse owner in law constitutes a bailment. Ownership of the bushel of wheat remains with you and there is no transfer of ownership at all to the warehouse owner.

And as stated above, if the owner sells the bushel of wheat without your consent or authority, he has committed a crime as well as having committed a civil wrong (a tort) of conversion – converting your property to his own use and he can be sued.

Let me use another analogy. If a cashier in a supermarket removes $100 from the till on Friday to have a frolic on Saturday, he has committed theft, even though he may replace the $100 on Monday without the knowledge of the owner / manager of the supermarket. The $100 the cashier stole on Friday is also indistinguishable from the $100 he put back in the till on Monday. In both situations – the wheat in the warehouse and the $100 dollar bill in the till, which have been unlawfully misappropriated would constitute a crime.

Keep this principle and issue at the back of your mind.

Now we shall proceed with the money that you have deposited with your banker.

I am sure that most of you have little or no knowledge about banking, specifically fractional reserve banking.

Since you were a little kid, your parents have encouraged you to save some money to instil in you the good habit of money management.

And when you grew up and got married, you in turn instilled the same discipline in your children. Your faith in the integrity of the bank is almost absolute. Your money in the bank would earn an interest income.

And when you want your money back, all you needed to do is to withdraw the money together with the accumulated interest. Never for a moment did you think that you had transferred ownership of your money to the bank. Your belief was grounded in like manner as the owner of the bushel of wheat stored in the warehouse.

However, this belief is and has always been a lie. You were led to believe this lie because of savvy advertisements by the banks and government assurances that your money is safe and is protected by deposit insurance.

But, the insurance does not cover all the monies that you have deposited in the bank, but to a limited amount e.g. $250,000 in the US by the Federal Deposit Insurance Corporation (FDIC), Germany €100,000, UK £85,000 etc.

But, unlike the owner of the bushel of wheat who has deposited the wheat with the warehouse owner, your ownership of the monies that you have deposited with the bank is transferred to the bank and all you have is the right to demand its repayment. And, if the bank fails to repay your monies (e.g. $100), your only remedy is to sue the bank and if the bank is insolvent you get nothing.

You may recover some of your money if your deposit is covered by an insurance scheme as referred to earlier but in a fixed amount. But, there is a catch here. Most insurance schemes whether backed by the government or not do not have sufficient monies to cover all the deposits in the banking system.

So, in the worst case scenario – a systemic collapse, there is no way for you to get your money back.

In fact, and as illustrated in the Cyprus banking fiasco, the authorities went to the extent of confiscating your deposits to pay the banks’ creditors. When that happened, ordinary citizens and financial analysts cried out that such confiscation was daylight robbery. But, is it?

Surprise, surprise!

It will come as a shock to all of you to know that such daylight robbery is perfectly legal and this has been so for hundreds of years.

Let me explain.

The reason is that unlike the owner of the bushel of wheat whose ownership of the wheat WAS NEVER TRANSFERRED to the warehouse owner when the same was deposited, the moment you deposited your money with the bank, the ownership is transferred to the bank.

Your status is that of A CREDITOR TO THE BANK and the BANK IS IN LAW A DEBTOR to you. You are deemed to have “lent” your money to the bank for the bank to apply to its banking business (even to gamble in the biggest casino in the world – the global derivatives casino).

You have become a creditor, AN UNSECURED CREDITOR. Therefore, by law, in the insolvency of a bank, you as an unsecured creditor stand last in the queue of creditors to be paid out of any funds and or assets which the bank has to pay its creditors. The secured creditors are always first in line to be paid. It is only after secured creditors have been paid and there are still some funds left (usually, not much, more often zilch!) that unsecured creditors are paid and the sums pro-rated among all the unsecured creditors.

This is the truth, the whole truth and nothing but the truth.

The law has been in existence for hundreds of years and was established in England by the House of Lords in the case Foley v Hill in 1848.

When a customer deposits money with his banker, the relationship that arises is one of creditor and debtor, with the banker liable to repay the money deposited when demanded by the customer. Once money has been paid to the banker, it belongs to the banker and he is free to use the money for his own purpose.

I will now quote the relevant portion of the judgment of the House of Lords handed down by Lord Cottenham, the Lord Chancellor. He stated thus:

“Money when paid into a bank, ceases altogether to be the money of the principal… it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it.

The money paid into the banker’s, is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains himself,…

The money placed in the custody of the banker is, to all intent and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable TO THE PRINCIPAL IF HE PUTS IT INTO JEOPARDY, IF HE ENGAGES IN A HAZARDOUS SPECULATION; he is not bound to keep it or deal with it as the property of the principal, but he is of course answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.” (quoted in UK Law Essays,  Relationship Between A Banker And Customer,That Of A Creditor/Debtor, emphasis added,)

Holding that the relationship between a banker and his customer was one of debtor and creditor and not one of trusteeship, Lord Brougham said: 

“This trade of a banker is to receive money, and use it as if it were his own, he becoming debtor to the person who has lent or deposited with him the money to use as his own, and for which money he is accountable as a debtor. I cannot at all confound the situation of a banker with that of a trustee, and conclude that the banker is a debtor with a fiduciary character.”

In plain simple English – bankers cannot be prosecuted for breach of trust, because it owes no fiduciary duty to the depositor / customer, as he is deemed to be using his own money to speculate etc. There is absolutely no criminal liability.

The trillion dollar question is, Why has no one in the Justice Department or other government agencies mentioned this legal principle?

The reason why no one dare speak this legal truth is because there would be a run on the banks when all the Joe Six-Packs wise up to the fact that their deposits with the bankers CONSTITUTE IN LAW A LOAN TO THE BANK and the bank can do whatever it likes even to indulge in hazardous speculation such as gambling in the global derivative casino.

The Joe Six-Packs always consider the bank the creditor even when he deposits money in the bank. No depositor ever considers himself as the creditor!

Yes, Eric Holder, the US Attorney-General is right when he said that bankers cannot be prosecuted for the losses suffered by the bank. This is because a banker cannot be prosecuted for losing his “own money” as stated by the House of Lords. This is because when money is deposited with the bank, that money belongs to the banker.

The reason that if a banker is prosecuted it would collapse the entire banking system is a big lie.

The US Attorney-General could not and would not state the legal principle because it would cause a run on the banks when people discover that their monies are not safe with bankers as they can in law use the monies deposited as their own even to speculate.

What is worrisome is that your right to be repaid arises only when you demand payment.

Obviously, when you demand payment, the bank must pay you. But, if you demand payment after the bank has collapsed and is insolvent, it is too late. Your entitlement to be repaid is that of a lonely unsecured creditor and only if there are funds left after liquidation to be paid out to all the unsecured creditors and the remaining funds to be pro-rated. You would be lucky to get ten cents on the dollar.

So, when the Bank of England, the FED and the BIS issued the guidelines which became the template for the Cyprus “bail-in” (which was endorsed by the G-20 Cannes Summit in 2011), it was merely a circuitous way of stating the legal position without arousing the wrath of the people, as they well knew that if the truth was out, there would be a revolution and blood on the streets. It is therefore not surprising that the global central bankers came out with this nonsensical advisory:

“The objective of an effective resolution regime is to make feasible the resolution of financial institutions without severe systemic disruption and without exposing taxpayers to losses, while protecting vital economic functions through mechanisms which make it possible for shareholders and unsecured and uninsured creditors to absorb losses in a manner that respects the hierarchy of claims in liquidation.”(quoted in  FSB Consultative Document: Effective Resolution of Systemically …)

This is the kind of complex technical jargon used by bankers to confuse the people, especially depositors and to cover up what I have stated in plain and simple English in the foregoing paragraphs.

The key words of the BIS guideline are:

“without severe systemic disruptions” (i.e. bank runs),

“while protecting vital economic functions” (i.e. protecting vested interests – bankers),

“unsecured creditors” (i.e. your monies, you are the dummy),

“respects the hierarchy of claims in liquidation” (i.e. you are last in the queue to be paid, after all secured creditors have been paid).

This means all depositors are losers!

Please read this article carefully and spread it far and wide.

You will be doing a favour to all your fellow country men and women and more importantly, your family and relatives.
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Offline jdwheeler42

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Re: Bail-Ins: It's not your Money
« Reply #2 on: April 25, 2013, 05:38:31 PM »
It's really quite simple...

You pay your lawyer...
You pay the warehouse owner...
You pay your broker...
They have a fiduciary duty to you.

Your bank pays you for your deposit.
It has no fiduciary duty.
Making pigs fly is easy... that is, of course, after you have built the catapult....

 

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