Patterico's Pontifications

3/31/2013

Cyprus Raid on Deposits Waaaaaaaay Bolder Then Initially Predicted

Filed under: General — Patterico @ 10:32 am

Anyone who flies has experienced it. The voice comes over the loudspeaker and says your flight has been delayed 20 minutes. Well, that’s annoying. But you have two hours to make your connection, so you’ll be OK. A little while later, it turns out the delay is 40 minutes. Still no problem. After another wait, it turns out the delay will be an hour. Then, after another long wait, they say the flight has been delayed an hour and a half. Now that connection is looking pretty tight. But don’t fret! You won’t have to worry about rushing to make the connection . . . because, you see, as the new boarding time approaches, there is another announcement: It turns out the flight is delayed three hours and you have no chance of making it.

But this news always drips out, one announcement after another — and you always suspect that they knew all along that the delay would be three hours.

Which brings us to Cyprus. First, depositors were told that their accounts would be hit for 7 percent — 10 percent for the rich folks. Then — whoops! — it turned out it wasn’t 10 percent, but 30 percent. Whoops, we meant 40 percent.

What was next? Half?

HALF! (Language and content warning.)

(That clip is profane, misogynistic, and horrible. I don’t even know why I posted it.)

No, Cyprus is not planning to take half. No, no, no. Nothing of the sort.

More like . . . 60 percent.

Major depositors in Cyprus’s biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks and saved the island from bankruptcy.

Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent – the first time the euro zone has made bank customers contribute to a bailout – had already unnerved investors in European lenders this week.

But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.

See, they did it again! Did we say 60 percent? We meant 62.5 percent! In the space of just two paragraphs, depositors lost another 2 1/2 percent.

Officials are assuring the public that this is a “one off” — it certainly couldn’t happen anywhere else.

Oh hey, by the way? Your taxes went up a little at the beginning of the year, but Obama says you have to pay just a little more.

UPDATE: Thanks to Stashiu3 for the link.

43 Responses to “Cyprus Raid on Deposits Waaaaaaaay Bolder Then Initially Predicted”

  1. It’s a “one-off” in the sense that no sane person will ever bank with Cyprus again.

    JVW (aa050c)

  2. Officials are assuring the public that this is a “one off” — it certainly couldn’t happen anywhere else.

    After this, why would any rational person continue to invest another dime in a Cyprus institution?

    aunursa (7014a8)

  3. My concern: after this, why would any rational person continue to keep their money in a Spanish or Italian bank?

    Patterico (9c670f)

  4. P

    Cayman bankers looking at billions just sitting there…..

    EPWJ (a8d1fa)

  5. Your taxes went up a little at the beginning of the year, but Obama says you have to pay just a little more.

    oh. it’s a slippery slope huh?

    sheesh give a guy a hammer

    happyfeet (8ce051)

  6. but now they own stock in a broke bank, so at least they have that going for them…

    redc1c4 (403dff)

  7. The rich can afford it

    JD (b63a52)

  8. We have already suffered this by virtue of inflation and low interest but in a much more subtle way. It’s a feeling I have had for a while. This article expresses it way better than I ever could.
    http://www.spectator.co.uk/features/8874941/the-great-savings-robbery/

    Gazzer (7a0997)

  9. Portugal, Italy, and Ireland will soon be seeing their banks drained. I wonder why.
    This is EXACTLY WHY the Kennedy’s keep their trust funds off shore. It’s safer.

    Gus (694db4)

  10. What’s been missed here is that the pain is now being concentrated on the two Cypriot banks that are actually bust — Laiki Bank and Bank of Cyprus — largely by putting all the depositors cash into Greek Government bonds. The other banks with the Russian deposits seem to have chosen better places to invest.

    And (after the originally scandalous proposal to inflict losses on secured depositors in all the banks, not just the bad ones, was shot down), what we are seeing is simple what happens when an enterprise goes bust. Secured depositors are rescued, everyone else gets a portion of the scraps in defined order, creditors — the €100k+ depositors — first, bond and stock holders after, and so on down the line.

    The Sage (ba2a4c)

  11. Officials are assuring the public that this is a “one off” — it certainly couldn’t happen anywhere else.

    They’re doing so OH so effectively.

    EUobserver: ECB man says Cyprus is model for future bailouts

    ECB board member Klaas Knot told Dutch newspaper Het Financieele Dagblad the Cypriot bailout, which involves seizing savers’ money, is a model for future rescues. He said the “approach … has been on the table for a [long] time in Europe. This approach will be part of European liquidation policy.”

    Steve57 (be3310)

  12. Can someone please explain the objection to this? If you lend money to a business and it goes bust, why would you expect to get all your money back? Why is a bank different in this regard? The initial proposal was going to hit insured deposits, and I saw the problem with that. But these are uninsured, so why should they come ahead of other creditors? The money is gone, and someone has to take a bath. So long as union whores with unsecured debt aren’t being given precedence over people with secured debt.

    Milhouse (15b6fd)

  13. I mean, I understand why it might be a stupid idea. But not why it provokes moral outrage.

    Milhouse (15b6fd)

  14. The operation was a success, the patient died, let’s try again.

    narciso (3fec35)

  15. If you lend money to a business and it goes bust, why would you expect to get all your money back? Why is a bank different in this regard?

    I think what makes the difference is that the same crowd that was assuring depositors their deposits were guaranteed is the same “you didn’t read the fine print” crowd now raiding into those very same deposits.

    Steve57 (be3310)

  16. Aaaaaand the hits just keep on coming. At least one Cypriot newspaper is reporting that the family of the current President moved “tens of millions” of Euros to London three days before funds in Cyprus banks were frozen. If you are surprised raise your hand.

    glenn (647d76)

  17. I think what makes the difference is that the same crowd that was assuring depositors their deposits were guaranteed

    Who claimed that uninsured deposits (i.e. those over E100K) were guaranteed? Why would they claim that, and why would anyone believe them?

    Milhouse (15b6fd)

  18. Milhouse – I would posit that the fundamental dishonesty exhibited throughout the process is what should guarantee outrage. See glenn’s comment above.

    JD (b63a52)

  19. At least one Cypriot newspaper is reporting that the family of the current President moved “tens of millions” of Euros to London three days before funds in Cyprus banks were frozen.

    I guess that could be a coincidence. Martha Stewart turned out to have genuinely had just such a coincidence.

    Milhouse (15b6fd)

  20. That’s assuming the story is even true.

    Milhouse (15b6fd)

  21. Anyone care to take odds on the over/under of 62.5%?

    JD (b63a52)

  22. And all this to avoid just calling those banks ‘bankrupt.’

    luagha (1de9ec)

  23. “I mean, I understand why it might be a stupid idea. But not why it provokes moral outrage.”

    Milhouse – Many civilized countries have a process when institutions fail through which assets are marshalled and liabilities are tallied before determining what share of the corpse different creditors receive. In many cases, assets are not converted to cash for extended periods of time and payments to creditors can take years.

    In this case, that process does not appear to have been followed or it was done behind closed doors. Did creditors have a seat at the table in the negotiations or was this just done by fiat?

    daleyrocks (bf33e9)

  24. Wait until Obama does it here to finance his next round of “stimulus.” He’s already talking about rebuilding everything even though he spent ONE TRILLION only 4 years ago to rebuild everything.

    First, they’ll grab our 401k plans. Then they’ll seize our savings, assuming anyone in America actually has an savings in another year. Then, they’ll outlaw owning gold AGAIN. And if they don’t get what they want by then, they’ll declare new currency and make us trade in our “old” for “new” at a somewhat discounted rate…

    They’ll get it when they want it. Afterall, whatever you earn is really theirs…

    WarEagle82 (2b7355)

  25. I think this is a much more relevant “half” video:

    http://www.youtube.com/watch?v=Tt8DoNerIPY#t=18s

    JohnW (7fb46f)

  26. Oh, but the good news is beside SE Asia, Brazil last week, now Australia this weekend are joining China in ditching USD as middleman.

    Reserve currency, going, going,..

    gary gulrud (dd7d4e)

  27. BTW, zerohedge had an interview yesterday of an expert on bank financing who, having investigated the plan, figures Cyprus will need another ‘bailin’.

    Cypriots are paying into the EU, they get nothing.

    gary gulrud (dd7d4e)

  28. the Steven Martin sketch about Yorick the barber, comes to mind.

    narciso (3fec35)

  29. 24. Listen up people. That is our template, sure as your living and breathing.

    They’ve already run the trial balloon you 401Ks will have to include T-Bills.

    It’ll only be a couple years before the Fed starts turning in a loss for as far as the eye can see.

    gary gulrud (dd7d4e)

  30. Your taxes went up a little at the beginning of the year, but Obama says you have to pay just a little more.

    And a number of idiot voters will still cast their votes for Democrats…

    Blacque Jacques Shellacque (1016a0)

  31. What do people with large accounts in the second largest bank get? Last I heard a 100% haircut.

    {O.O}

    JD (1a2024)

  32. I called my relatives in Greece and told them to put all their Euros in my U.S. account for safety. It didn’t work.

    nk (c5b7ef)

  33. nk, it would work better if you told them that you were going to get them a settlement for an airliner crash in Angola that killed a distant relative of theirs for whom they are the only heir.

    SPQR (768505)

  34. That doesn’t work in my family. We know each other to nth degree and detail of relationship (e.g., for real, the sister of the husband of the daughter of the son of my mother’s mother’s brother, whose husband owns the restaurant in Berwyn).

    nk (c5b7ef)

  35. JD,

    I don’t know how reliable this is but Russia Today reports there may have been an exception to that haircut.

    DRJ (a83b8b)

  36. Reserve currency? China hasn’t bought US debt in a year, has $3 Trillion in foreign currency, has with Russia pledged an alternative to the World Bank and IMF and is eliminating the need for the Fed.

    http://directorblue.blogspot.com/2013/03/the-hegemony-of-us-dollar-coming-to-end.html

    My timelines are useless, but the pace to DOOM is certainly accelerating.

    gary gulrud (dd7d4e)

  37. 23. “I mean, I understand why it might be a stupid idea. But not why it provokes moral outrage.”

    Milhouse – Many civilized countries have a process when institutions fail through which assets are marshalled and liabilities are tallied before determining what share of the corpse different creditors receive. In many cases, assets are not converted to cash for extended periods of time and payments to creditors can take years.

    In this case, that process does not appear to have been followed or it was done behind closed doors. Did creditors have a seat at the table in the negotiations or was this just done by fiat?

    Comment by daleyrocks (bf33e9) — 3/31/2013 @ 3:23 pm
    </blockquote

    I honestly think the outrage comes when after announcing that everyone is going to take a haircut the gub'mint shows up at your door with a skinning knife.

    Steve57 (be3310)

  38. Chart fu:

    http://directorblue.blogspot.com/2013/04/the-6-economic-charts-which-vintage.html#more

    The first on the Fed is curiously conceived, it seems to imply the long-dated bonds support the entire market.

    And Stockman’s screed at the link is worth perusal:

    http://www.peakprosperity.com/podcast/81371/david-stockman-federal-reserve-fed-wall-street-bernanke-deformation

    gary gulrud (dd7d4e)

  39. Except Stockman, backstabbing weasel, always hits W first, maybe this is why the DOJ spared him from prosecution, over irregularities with Collins and Aikman.

    narciso (3fec35)

  40. 39. Stockman is doubtless pointing our Hank Paulson’s duplicitous opportunism to enhanced his own blackened patina.

    “Like one, looking in a mirror and turning away, forgets what he saw”.

    gary gulrud (dd7d4e)

  41. our out

    gary gulrud (dd7d4e)

  42. http://www.zerohedge.com/news/2013-03-31/cyprus-presidents-family-transferred-tens-millions-london-days-deposit-haircuts

    A day after former Cypriot President Vassilou was found to be among many elite Cypriot (politicians and businessmen) who had loans written-off by the major (now insolvent) banks; it appears the rot is far fouler than expected. In a somewhat stunning (or purely coincidental) revelation, ENETEnglish reports that Cypriot newspaper Haravgi claims that current President Nicos Anastasiades’ family businesses transferred ‘dozens of millions’ from their Laiki Bank accounts to London just a week before the devastating depositor haircuts were unleashed upon his people. Of course, the denials are loud and Anastasiades has demanded an investigation into the claims; we are sure the government-selected ‘independent’ committee will be as thorough as the Libor anti-trust investigators. As a reminder, as we noted yesterday, here are Cyprus’ gun control laws.

    Via EnetEnglish,

    Does this surprise anyone? I suspected exactly this was going on. And I said I’d lay money on the certainty that Cypriot officials transferred their money to non-Cypriot banks before they slipped everyone else the bad newss. But then, so did a lot of people. Really what happened in Cyprus was a crime in progress we all got to see play out in real time. Just a casual familiarity with the criminal mind would have suggested this.

    The Cyprus bailout is small. The Cypriot government ripped its depositors off to the tune of 5 billion Euros and got a 10 billion Euro loan from the EU in exchange.

    The USG spends about that in a day.

    The bailout is small. I’m going to take a guess and say the repercussions will be big.

    Steve57 (be3310)


Powered by WordPress.

Page loaded in: 0.8624 secs.