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Old 03-18-2013, 05:11 PM   #61
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It is the same in Oz. The article sparky linked to says that the definition of a dormant bank account has been shortened from 7 years to 3 years, and you can claim it back from the government just like before.


+1. That's correct. The money is held in trust and can be claimed back at any time. There is no "expiry date". The government introduced it to help with its cash flow, but it is still a liability in the government's books, meaning it has to be repaid on demand to the rightful owner.
Many countries have similar "unclaimed monies" legislation, where money left unclaimed by the rightful owners are sent to a public trustee or similar governing body. It is far more secure than leaving it in the hands of corporations who in theory can go under, in which case the owner has no hope in hell of recovering their cash
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Old 03-18-2013, 05:17 PM   #62
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I'm not convinced a new (albeit insane!) precedent hasn't been set here. We'll see.
What new precedent? The little guys are required to bail out the big guys when the big guys mess up. This already happened in the USA a few years ago. Cyprus is just more up front about what they are doing.
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Old 03-18-2013, 05:45 PM   #63
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Even if bank deposits are not technically held in trust for the depositors, using their deposits to bail out the bondholders seems like terrible public policy to me. If anything, the current shareholders should be eliminated and the bondholders should be subjected to a forced debt-to-new equity conversion. Then and only then should depositors take a haircut.

I wonder what genius came up with this idea.
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Old 03-18-2013, 06:07 PM   #64
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Even if bank deposits are not technically held in trust for the depositors, using their deposits to bail out the bondholders seems like terrible public policy to me. If anything, the current shareholders should be eliminated and the bondholders should be subjected to a forced debt-to-new equity conversion. Then and only then should depositors take a haircut.

I wonder what genius came up with this idea.
My understanding is that the banks were insolvent, even completely wiping out the shareholders (which I am pretty sure will happen) and the bondholders doesn't leave enough money.

Germany said Nein to sticking German shareholders with the bailout bill so... there weren't a lot of options.
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Old 03-18-2013, 06:18 PM   #65
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+1. What concerns me is the IDEA of confiscation. Other governments in the future might be tempted to do something similar. The US government is no exception.
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I must admit that it took me by surprise.
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Old 03-18-2013, 06:23 PM   #66
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Originally Posted by Gumby View Post
Even if bank deposits are not technically held in trust for the depositors, using their deposits to bail out the bondholders seems like terrible public policy to me. If anything, the current shareholders should be eliminated and the bondholders should be subjected to a forced debt-to-new equity conversion. Then and only then should depositors take a haircut.

I wonder what genius came up with this idea.
At least the depositors with less than 100K Euros, which is the insured amount. The initial reports said the money would not be taxed, it would be replaced with additional equity. Technically, I have no idea what that really means.

They are rethinking. That's good and bad. I think the only smart (and ballsy) move in the whole thing was by Mr Ha (see post 35).
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Old 03-18-2013, 09:45 PM   #67
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Quote:
Originally Posted by Gumby View Post
Even if bank deposits are not technically held in trust for the depositors, using their deposits to bail out the bondholders seems like terrible public policy to me. If anything, the current shareholders should be eliminated and the bondholders should be subjected to a forced debt-to-new equity conversion. Then and only then should depositors take a haircut.

I wonder what genius came up with this idea.
Apparently the germans, as they and the IMF and the ECB hold mucho bank debt in all these marginal countries.

Anyway, this aspect of protecting bondholders seems to be exactly the same as our own bank bailout. Only the bondholders in the very first bank failures lost any money; after that they stayed whole and taxpayers ponied up, or more accurately are on the hook for eventually doing that. I bleive Ireland was the same. Perhaps only Iceland reneged on that agreement, and told the bondholders, mostly British and some continentals, that they were out of luck. Here President Olafur Grimson tells how to do this.
How did Iceland recover? Report from Davos | Beyond Money

Ha
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Old 03-18-2013, 09:55 PM   #68
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Interesting reading about some other countries etc..


But, let's try something that actually might be OK... but would never happen...

Wipe out the bank shareholders 100%.... if you convert the bondholders to equity and the bank is solvent then they can be converted....

Take the money from the accounts and the account holders now own the bank... maybe with the bondholders.... maybe 100%.... (I would prefer 100% myself)...

NOW the account holders have an interest in the bank staying solvent... they might not make a run on the bank... also, they can sell their shares in the open market if they need the cash (who knows what % they would get, but they could get something).....

Again, no change of this happening as the bondholders are probably banks in other EU countries and do NOT want to lose everything....
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Old 03-18-2013, 09:56 PM   #69
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The other issue is they are breaking the agreements made regarding depositor insurance for accounts below 100K Euro. What this demonstrates is how much of our monetary systems rely upon trust and technology. Cyprus has now extended the bank holiday to Thursday.....the reason for the run is that it only takes a few lines of code to effect the transfer...err confiscation. And for someone to say, "it would never happen here," history shows that is not necessarily true. I guess the best motto is hope for the best, prepare for the worst.
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Old 03-18-2013, 11:25 PM   #70
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Taking people's money out of their account as a 'tax' is something that I have not heard happen before... and I wonder if they are only talking about bank accounts or does it include brokerage accounts IOW, Fidelity and Vanguard has a LOT of people's money... and if they took a % of that it would hurt big time...
This won't happen in the United States without a constitutional amendment. The federal government is restricted by the constitution.

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Article I, Section 9, Clause 4:
No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.
This clause basically refers to a tax on property, including land and intangible assets. States have done "wealth taxes" in the past, like the infamous Florida intangible property tax. The federal government can't.
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Old 03-19-2013, 09:37 AM   #71
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This won't happen in the United States without a constitutional amendment. The federal government is restricted by the constitution.
Oh sure.
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Old 03-19-2013, 10:30 AM   #72
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What's tragic is that we now have even larger To Big To Fail banks, a situation that may tempt our government to do something similar. The government can and does pick winners and losers in this kind of situation - remember the GM bond holders who were taken to the cleaners on the GM bailout. IMHO, the special interests are so powerful, I can see them pressuring the government to sacrifice the savings of the middle class for the good of reckless bankers. They have already done this partially by holding down rates to levels far below inflation. I hate to write this, but that is what I am feeling,
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Old 03-19-2013, 10:35 AM   #73
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What's tragic is that we now have even larger To Big To Fail banks, a situation that may tempt our government to do something similar. The government can and does pick winners and losers in this kind of situation - remember the GM bond holders who were taken to the cleaners on the GM bailout. IMHO, the special interests are so powerful, I can see them pressuring the government to sacrifice the savings of the middle class for the good of reckless bankers. They have already done this partially by holding down rates to levels far below inflation. I hate to write this, but that is what I am feeling,
I hate to have to agree with you, but I do. The government should start proceedings soon to break up the "too big to fail" institutions.
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Old 03-19-2013, 01:18 PM   #74
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There may be more politics to this. The germans and russians butting heads behind the scenes.

How Russia Could Take Revenge Over Cyprus Deal - Yahoo! Finance
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Old 03-19-2013, 01:33 PM   #75
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There may be more politics to this. The germans and russians butting heads behind the scenes.

How Russia Could Take Revenge Over Cyprus Deal - Yahoo! Finance
Now that would be something new, the Germans and Russians not getting along.

Plus ça change, ...
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Old 03-19-2013, 01:54 PM   #76
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There may be more politics to this. The germans and russians butting heads behind the scenes.

How Russia Could Take Revenge Over Cyprus Deal - Yahoo! Finance
I think this is the quote from the article that is the most relevent... my bold...

'"It's mind-boggling that German bureaucrats and politicians can think that this is a sensible way to share the pain," Keen said. "If you destroy the trust that depositors have in their bank accounts, you fundamentally destroy the oil of capitalism."
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Old 03-19-2013, 03:17 PM   #77
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Thanks heaps for this update. I've left some money at Westpac due to high interest, so I'll be sure to make a withdrawal. Wonder how gov't will calc interest on 'taxed' funds?

BTW, you have been awarded a prize in this weeks longest name contest. Award Central will be contacting you with details.
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Old 03-19-2013, 03:19 PM   #78
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Now that would be something new, the Germans and Russians not getting along.

Plus ça change, ...
Russian word for German: Nemyetski

Supposedly literally means someone who can neither hear nor speak. The Germans were the first non-Slavs the Russians ran into, I guess.
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Old 03-19-2013, 04:49 PM   #79
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Now that would be something new, the Germans and Russians not getting along.

Plus ça change, ...
Ya think? LOL!
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Old 03-19-2013, 06:19 PM   #80
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It did NOT happen. The Government of Cyprus voted it down.

Russians are uneasy. Cyprus has been a favorite place to place bank deposits.
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