Are you ready for your ‘haircut?’
by Bob Livingston
A ‘haircut’ is bankster terminology for stealing stockholders’ and depositors’ money to prop up banks failing because of the banksters’ bad decisions making loans that won’t be repaid and speculating on bad debt financial instruments. The process is also euphemistically called a “bail-in,” which sounds like the opposite of a bail-out, but is just as nefarious if not more so.
On Sunday, a little-reported but highly significant economic event took place across the ocean. Austria’s Financial Market Authority stepped in to wind down “bad bank” Hetta Asset Resolution and impose a moratorium on its debt repayments, Reuters reported.
This is big.
Hetta Asset Resolution was supposed to be the “good bank” formed out of now-defunct lender Hypo Alpe Adria. But an audit found a hole of $8.51 billion in the bank’s balance sheet. Its debt was guaranteed by the local Carinthia province government and Austria’s national government. But rather than put taxpayers on the hook, the government implemented a new European Union rule that went into effect on January 1 to use the “bail-in” procedure to save the banksters.
Under the procedure, the bank’s stockholders will get 46 cents on the dollar of their investment back, and they will likely receive it in the form of stock in the failed bank. The bank’s depositors will see their deposits wiped out. Not just a haircut, as in Cyprus, but possibly a total wipe-out of all of their savings.
This is the first implementation of the new law, and it sets a precedent for other troubled EU banks. But it’s not the first time in the EU a bail-in was used. Cypriot shareholders, bondholders and depositors in the country’s two largest banks were plundered to the tune of almost 50 percent in 2013.
Germany’s Deutsche Bank is in serious trouble, as are a number of other EU and Japanese banks. More haircuts are likely.
But if Deutsche Bank goes down, it will likely bring the world economy down with it. There’s much speculation in alternative media that the Deutsche Bank situation was front and center in this week’s meeting between President Barack Obama, Vice President Joe Biden and Fed Chair Janet Yellen. A Deutsche Bank collapse would be worse than the Lehman Brothers collapse in 2008 because of the $75 trillion in derivatives (credit default swaps) it holds for all the EU banks and around the globe.
Bloomberg reported last month that JP Morgan Chase, Goldman Sachs and Citigroup were in talks with Deutsche Bank to prop it up.
And now, thanks to the Fed, we know that those banks, along with Bank of America, Bank of New York Mellon, State Street, Wells Fargo and Morgan Stanley are already stressed and failed to live up to regulations in the Dodd-Frank bill to have a strategy for a rapid and orderly resolution under bankruptcy if the banks failed.
During the 2008 crisis, the U.S. Federal Reserve propped up a number of EU banks with trillions of U.S. dollars. It’s likely that the Fed is once again looking to prop up the world economy on the backs of American taxpayers.
Not to worry though, the U.S. has implemented “bail-in” rules for American bank depositors just like in the EU. Are you ready for your “haircut?”
Under the rules, if you hold stock in a failing bank – whether directly or through your retirement plan – that stock can be instantly devalued to an arbitrary amount (in the Hetta situation is was 54 percent) to prop up the bank. And if you have deposits in a failing bank, your deposits can be wiped out, Federal Deposit Insurance Corporation (FDIC) limits notwithstanding.
To protect yourself from such a scenario, you should keep your money out of banks beyond what’s needed to cover your bills. You should hold cash in case of a bank holiday. You should hold gold and silver in your possession.
There are some serious financial earthquakes rumbling in the world economy. Don’t be caught unprepared.