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EU Highway Robbery And Haircuts Going International: Depositors in Spain Getting Robbed

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Eurozone Bank Crisis is Back on; Now Depositors are Robbed in Spain
March 26, 2013 • 10:05AM

Significant contagion has appeared in the first 24 hours after the Cyprus bank crisis “resolution,” with the forced bankruptcy of a large Spanish bank inclusive of a partial wipeout of depositors, and the pounding of bank stocks on the markets of Spain and Italy. Trading in bank stocks had to be halted multiple times in both countries to slow the plunge, and a downgrade of Italian sovereign credit by ratings agencies appears imminent. The euro currency also fell sharply, including — ironically — against the Russian ruble.
Already overnight yesterday, there were commentaries by leading figures such as former ECB chief economist Juergen Stark and major dailies such as the Irish Independent and London’s Guardian, that the Cyprus bank bailout was not large enough, the shutdown of number-two Cyprus Popular Bank, or Laiki, would be followed by number-one Bank of Cyprus and a collapse of the Cypriot economy. But the contagion is turning out not to be “contained” to Cyprus, as Ben Bernanke once famously forecast of the U.S. mortgage meltdown.
A significant trigger was a very damaging admission by the President of the so-called Eurogroup, Netherlands Finance Minister Jeroen Dijsselbloem. Reuters’ headline of the interview with Dijsselbloem, “Cyprus a Template for the EU,” was a warning to bank depositors Europe-wide that their deposits could and would be lost in any bank that became a target for “resolution.”
Dijsselbloem said, “What we’ve done last night is what I call pushing back the risks. If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank — and if necessary the uninsured deposit holders.”
Even as Dijsselbloem spoke there was a forced bank failure in Spain in which depositors lost their money. The Wall Street Journal reported today that of the banks effectively nationalized under the government lending agency FROB 18 months ago, a big one (Bankia) and a small one (Catalunya) are being bankrupted and taken over by FROB, apparently with a EU40 billion bailout loan from the European Stability Mechanism (ESM). This was ordered by European Commission after FROB failed in an attempt to sell Catalunya. The FROB will effectively own all the stock in the restructured banks, with the existing stockholders and junior bondholders losing 99.5% of their investments.
But in the Bankia case the stockholders include large numbers of depositors, conned into buying Bankia stock with their deposits in 2011-12, and now losing those deposits. This was precisely the widespread bank practice exposed in the United States in 1933 by the famous “Pecora hearings” in the Senate Banking Committee, and then prohibited under the Glass-Steagall Act.SEE VIDEO

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    Total 4 comments
    • ElOregonian

      Haircuts? How about outright STEALING!!! These private accounts have already paid taxes on them and now the government wants to steal/confiscate another 40% just because the banks took terrible high risk, high yield derivatives gamble and they lost. Now the criminal bankers, in collusion with governments, have decided in order to preserve the banking industry that all depositors shall bear the burden of making the banks whole again.

      In other words, you lose your money through bad investments, that’s just tough. Banks lose your money through bad investments, well that’s just the cost of business and that too is still passed on to you.

    • Fianna

      Its what you deserve if your still being used by banks! Turn it around and use them, only enough in a single account so you can come in and cash any checks you may have. Other then that, they can pi$$ off!

      • Anonymous

        actually, it seems like this is what they want us to do for some reason. I mean, what ‘aware’ person is going to leave their money in the banks now? That is just asking for it to be taken. This could not have been something done without great forethought, for whatever end-game they have in mind.

    • Anonymous

      Well, if you think about……if everyone starts taking their money out of the banks, what are they going to do with it? You’re going to buy assets and “stuff”. Voila! You have just increased the velocity of money in the economy. Unfortunately, inflation will also increase in a dramatic way. But then, the FED and the banking oligarchs don’t care about inflation, they only care about deflation. In the former, they win/we lose but the later we win/they lose.

      Sometimes the simplest explanation is the best.

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