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Fox
04-03-13, 12:26 PM
Hi everyone

Just looking for answers to some questions about this new wonder called "Bail-in". Now on the surface, it sounds like a "proper" thing to do when an institution collapses. You entrust a yahoo to hold on to your money. The yahoo wastes it all on a gambling spree trying to get rich. You lose your money. Sucks to be you, and us, but that's how it goes.

Now that being said, when the Yahoo actually has all the money of an entire country, and a few others, things get serious. So, my questions are:

1) how is "Bail-In" any different than the government just saying "Tough cookies" to a failed bank? I assume here that bank account insurance is still functioning.

2) Bailed-in money for the large depositors goes...? If equity and bond holders are wiped out, who is left to confiscate and give the money to? Or is this were the funds will come from to cover the "insured" accounts. Hmm, I wonder how much my mom likes to know that she is now the RBC's underwriter?

3) What is "off" the table when a bank collapses. I have some investment accounts, empty till the next drop so no biggie there, but will these be included in Bail-In'able assets? I understand the risk of investing, but adding in the risk of an over-leveraged banking system? Perhaps a moot point as all ships will sink in a Tsunami, but still.

4) What are the implications of this as far as large deposits go? They say, there are no bank runs in Cyprus, laughable to me, but what is happening in the rest of the EU and PIIGS? Any reports out there of people spreading their money around or diversifying out of the EU?

5) As we now have this in Canada's March federal budget, this has been in the works and discussed in summits long before Cyprus. Who in their right mind thought it would be a good idea to shake the confidence of a fractional reserved fiat world order? Or is this just a scare tactic to get banks to straighten up their acts? (again, laughable)

6) Does this mean a new Renascence in precious metals? If we are all to start suddenly shouting that our Fiat emperors are naked does this mean people will start understanding the logic behind "10% of your portfolio should be precious metals"? Such a move would lead to an astronomical, and frightening to the average Joe, price increases.

Anyways, would love to hear some feed back. And please merge if this is discussed elsewhere, but I didn't find a specific bail-in topic.

Good luck all

don
04-03-13, 02:06 PM
from the Cyprus thread . . .


today's New Word is . . .

Bail-In


n. the reverse of the securing of the release of someone in custody, i.e. paying to keep them there

v. 1-filling a leaking boat with water from a pail

2-refusing to abandon a bankrupt entity by confiscating its chief assets, namely its depositors

charliebrown
04-03-13, 02:56 PM
The day I heard of the cyprus bail-in, I bought gold at BV. So far this seems to be a mistake as far as timing goes. I also moved some of my savings in a high yield savings account to vanguard, then bought their treasury money market fund. Is my money safer in vanguard tmm then in a bank? I don't think the U.S. is ready to do a cyprus today, but ... maybe the end is closer than farther. What does a large scale bank run in the e.u. do to the banking system in the U.S? If another big bank goes down this process will be repeated more gold and more money leaves the u.s. banking system. It used to be that the high yield account was paying 1.00% and a MM was paying .05%. Now that difference has shrunk to .25% vs. .01%. The advantage of the bank is not so clear cut.

What happens if a credit union goes down? It is not a publically traded company? Does the deposit to equity swap still work? I have been told that even if
I keep my money at a C.U. they park unused funds at a big bank like JPM, so if JPM goes down, then my C.U. probably is loser on that asset, and I still get
a haircut.

The next thoughts are is the gold in phys and gtu safe? The bullion is stored in the imperial bank of canada. If this bank blows up, is the gold safe. I assume
that the gold is held in a custodial arrangment and is NOT an asset of the bank, hence the depositors get screwed and the gold is safe, but ... we are moving
from a rule of law to chaos. The rule book will get thrown out.

I am also considering opening up a treasury direct account. but then I have another customer relationship to manage. Is this safer then a mutual fund filled
with t-bills/notes???

don
04-03-13, 03:11 PM
There is a FDIC-like organization for CUs - the National Credit Union Administration. Pick your poison.

The National Credit Union Administration (NCUA) is the federal agency that administers the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF, like the FDIC’s Deposit Insurance Fund, is a federal insurance fund backed by the full faith and credit of the U.S. Government.



The NCUSIF insures member savings in federally insured credit unions, which account for approximately 98 percent of all credit unions. All federal credit unions and the vast majority of state-chartered credit unions are covered by NCUSIF insurance protection.

http://www.ncua.gov/dataapps/pages/si-tools.aspx

charliebrown
04-03-13, 03:33 PM
I guess I don't understand ... the FDIC has about 30B in its insurance fund. If there is a bank run in the u.s. like say BAC goes down. The FDIC will not have enough.
I think ??? the FDIC has a credit line to the treasury. How big and secure is the line? If FDIC asks for 100B will it get it quick? Are there loop holes in the insurance where there will be some exuse why you are not covered. I have heard that if the bank is insolvent but keeps its doors open for business it does not have to pay insurance, but your funds will be frozen. I have also heard that the per account rule of 250K is no longer true, but it is all accounts at all institutions under the same SSN. (change in rules in 2012) I am nervous that a big bank like BAC or JPM could go down because of CDS exposure.

And this ....
Holy Cow ... I just went to treasury direct to see how difficult it would be to open an account and looked at ibonds. They seem to good to be true.
They say they pay out at full CPI-U, and are redeemable after 1 year. Does this mean that if I put in $1000 today, next year I can withdrawl $1020?
There is a clause that if you withdrawl before 5 years they take back 3 months of interest, but that is not bad compared to .25% i am getting on my
savings at the C.U. Am I reading this right? 2% return no risk? (except that CPI does not maintain pruchasing power)

charliebrown
04-03-13, 03:41 PM
On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, which, in part, permanently raises the current standard maximum deposit insurance amount (SMDIA) to $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. Consumers and bankers can find additional information regarding FDIC’s deposit insurance coverage through the use of the FDIC’s Electronic Deposit Insurance Estimator (EDIE) and deposit insurance publications located on the FDIC’s website “Are My Deposits Insured (http://www.itulip.com/forums/index.html)?” So, I think the law is per depositor / per institution. I think that all accounts in a single institution are aggregated???? very confusing. about account ownership category.

don
04-03-13, 04:42 PM
I guess I don't understand ... the FDIC has about 30B in its insurance fund. If there is a bank run in the u.s. like say BAC goes down. The FDIC will not have enough.
I think ??? the FDIC has a credit line to the treasury. How big and secure is the line? If FDIC asks for 100B will it get it quick? Are there loop holes in the insurance where there will be some exuse why you are not covered. I have heard that if the bank is insolvent but keeps its doors open for business it does not have to pay insurance, but your funds will be frozen. I have also heard that the per account rule of 250K is no longer true, but it is all accounts at all institutions under the same SSN. (change in rules in 2012) I am nervous that a big bank like BAC or JPM could go down because of CDS exposure.

And this ....
Holy Cow ... I just went to treasury direct to see how difficult it would be to open an account and looked at ibonds. They seem to good to be true.
They say they pay out at full CPI-U, and are redeemable after 1 year. Does this mean that if I put in $1000 today, next year I can withdrawl $1020?
There is a clause that if you withdrawl before 5 years they take back 3 months of interest, but that is not bad compared to .25% i am getting on my
savings at the C.U. Am I reading this right? 2% return no risk? (except that CPI does not maintain pruchasing power)

For the time being - rough times thay are - I'm parking cash in T-Bills through Treasury Direct. I use the short term rollover option - good up to 2 years. If you buy a 3 month bill you can roll it over 7 times.

charliebrown
04-03-13, 04:48 PM
thanks don.

what about the i-bonds. Do i read this correct? assuming a "managed" cpi-u of 2%, does this mean I get 2% per year with no principle risk?? very nice in a zirp world.
I could buy 1K a month so that after a year, I have something to withdrawl each month if I need the cash. I'm willing to lock the money in for a year to get 2%.