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View Diary: Bank Run in Cyprus, Will it Spread to Southern Europe? (322 comments)

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  •  If the banks are puny, why not let them fail? (1+ / 0-)
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    Do you think that $13 billion is not to be repaid?  Is there no interest upon that money?  Is there no percentage cut for arranging the deal for the funding banks? Seriously? Since when did banks hand over money - billions - for free?  Only the US government does that!  (This refers to the German banks as being the big banks, not Cyprus, btw)

    And, apparently, the haircut on depositors -- not the banks' investors, mind you -- will raise an immediate $5.8 billion.

    Almost a year ago, Cyprus projected its needs at 17 bln euros, which is nearly the value of the country's annual output (~18 bln euros).  However, the deal worked out is for only 10 bln euros and even that will be largely paid by domestic parties.  Therein lies the most controversial elements.  

    There will be an immediate tax on depositors in Cyprus.  Large deposits, which are defined as in excess of 100k euros, will lose 9.9%.  The government will take 6.75% from small depositors.    This is expected to raise 5.8 bln euros.  

    Broke a Cardinal Rule

    Depositors are not at fault for what banks owners and management decide to do, particularly not the small savings accounts who are hit with an immediate 6.75% confiscation.  The shareholders of the Cypriot banks should take ALL the hit without hitting the small savers particularly.

    But the owners just convert the depositors' money to their own in this case and use it to fund their own bailout.  Their "dilution" is lessened by about $5.8 billion euros.  A $5.8 billion euro transfer from working folks to the ownership class.

    There were multiple reports which indicated that Germany told Cyprus: Confiscate your depositors' money or leave the Eurozone.
    Amazing how that works, isn't it? All those with savings accounts thought that their money was theirs. Instead, German banks decided it wasn't.  Incredibly message to send, really.

    "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

    by YucatanMan on Sun Mar 17, 2013 at 11:59:07 PM PDT

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