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HomeCould a “Cyprus-Like” Situation Happen in US? It Already Has
Posted by Larry Doyle on March 21, 2013 8:00 AM |
The banks in Cyprus remain closed until at least next Tuesday out of fear that once the doors open a massive run on the banks will ensue.
The situation in Cyprus is clearly evidence of a financial system that remains on life support and that drastic situations precipitate drastic actions.
Before we lose our heads, though, isn’t this why free markets develop and implement rules of law? Indeed — or so we thought.
With the outcome of the situation in Cyprus remaining very much in question, many people in America wonder if a similar situation might unfold here. I would maintain that it already has and may occur with greater frequency and impact in the future. How so? Let’s navigate.
As the depositors in Cyprus are now learning, the integrity of deposit insurance seems to have been worth little more than the paper on which it was written. But wouldn’t the integrity of deposit insurance hold up under challenge in a court of law?
“Did you say, law, LD, as in the rule of law?
On that note, let’s cross over to our own shores and pose that very same question regarding the practice of the rule of law to the following situations:
1. Foreclosure abuses in which mortgage servicers clearly violated the rule of law in protecting both homeowners and mortgage investors for the benefit of major banks. The token fine assessed for this injustice was a joke.
2. Violation of bankruptcy procedures in the auto bailouts. Ask the creditors how that worked for them?
3. Clear violation of the SIPA in the manner in which Madoff trustee Irving Picard has gone about collecting and dispensing recovered funds.
4. Clear violation of SEC rules — without proper restitution and adjudication — by those involved in the distribution of a wide array of structured products, including the $50+ billion of supposed cash-equivalent auction-rate securities that remain outstanding a full 5-plus years after that market meltdown. Tell the thousand of ARS investors about the rule of law.
What do all of these situations exemplify?
The degradation of the rule of law. Clear as day.
With these precedents having been set, might we see a grab of other funds by our government if and as necessary? Well, let’s keep an eye on our retirement accounts. To wit, I welcome providing the following links to stories highlighted a few years back but continue to generate regular interest:
Blueprint for Government Takeover of IRAs, January 2010
Will Uncle Sam Takeover Your IRA? February 2010
Will Uncle Sam Takeover Your IRA? Part II, April 2012
Remain on guard and navigate accordingly.
Larry Doyle
Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.
The London Whale, Richard Fisher, and Cyprus
With all due respect LD, we should be concentrating on the problem, rather inciting fear in “possible” ludicrous solutions.
It is the utter arrogance of banksters that remains a problem.
It is the purposely underfunded, docile, outmanned, outgunned, sometimes duped and sometimes duplicitous regulators that remain a problem.
And then there is the Washington D.C. / Wall Street incest that can’t help siding against mom and pop to keep the invitations coming.
Stanford didn’t work for the CIA, and nobody is going to raid mom and pop’s retirement plans any more than has already been allowed to occur!
Keep it real LD, your better than that!
Peter,
I think the homeowners, creditors, and investors all would have maintained as well that their interests would have been protected. They weren’t.
Your points in regard to the bankers, regulators, and pols are all well taken but to think that Uncle Sam will not go to extraordinary lengths to protect interests not aligned with those deemed to “have enough money” already has already been proven.
A GREAT RECAP:
EU Gives Cyprus Bailout Ultimatum, Risks Euro Exit
Well said, Larry, thanks.
LD,
Man, you’re right on the money with this one!
God bless.
You forget the billions of dollars Uncle Ben is stealing from savers every year with his 0% interest rate policy.
We have been robbed of 5%/year for at least 5 years now, much worse than the one time 10% haircut the Cyprus depositors would take.
As Jeremy Grantham said on Charlie Rose, he is taking money from savers and retirees (who would actually spend the money) and giving it to investment bankers and speculators.
“We are transferring wealth from the poor to the rich by keeping interest rates low.”
100% agree !!
You don’t see the press out talking about how QE is a process of stealing assets from savers. QE and artificially held low interest rates is more insidious than the Cyprus asset grab because it happens quietly, slowly and broadly across all savors no matter how much is in the account.
How do you boil a frog ? Put him in a cool pot of water and turn up the heat slowly … its a nice bath, until its not … frog legs anyone ?
Something no one seems to be talking about is the question of where all the money the banks supposedly lost has gone.
It didn’t disappear – it was simply relocated from one pocket to another pocket.
Where exactly is this money sitting now?
Where is all the money, In the bank accounts, or used to buy hard assets for the folks that designed the crisis.
Take a look at the losses that GM would have suffered if they went through bankruptcy; the gov’t bails them out and ultimately exchanges the loans, preferred stock for common shares. Then the common shares are sold through the secondary market, spread broadly across many investors. GM never had to pay the funds back, the funds came back to the gov’t through new investors.
Stockholders and taxpayers always suffer the loses, they are just distributed throughout a high volume sucker pool.
Without a real investigation, we will never know the answer to my question.
With corporate entities, it would be childs play for the banks to relocate the money to other entities they control under the fiction of expense / contracts etc.
Obviously, it would be simple to run it through as many entities as they needed to to hide the theft. It’s beyond outrageous for the people to be forced to pay into a scheme like this.
Good read from Peter Schiff:
http://www.thedailybell.com/28869/Peter-Schiff-Cyprus-Lifts-the-Curtain
Another worthwhile read: Americans better wake up, the ignorance is bliss philosophy has a fatal flaw when it comes to your wealth.
Perhaps We Are All Cyprus Now
http://www.thedailybell.com/28872/Perhaps-We-Are-All-Cyprus-Now