Bank Bail-Ins: Can They Really Seize Your Deposits?

Issue LII

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Today’s Bullets:

• Bail-outs

• Bail-Ins

• History of Bail-Ins

• Credit Suisse and Can This Happen to You?

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Inspirational Tweet:

FOSS - #forthekids @FossGregfoss

Credit Suisse $CS depositors Please google “bail-in” and GFY #btc

Greg is always super insightful (if not colorful 😆) in his observations and explanations, isn’t he?

Point here is, though, Credit Suisse is in trouble. Deep Trouble. Question is, can they—will they—seize customer deposits to pay off creditors in a bankruptcy restructuring? Will they, in fact, tell their clients to just go pound sand (roughly translated from GFY)?

These are good questions and ones we all should be asking, no matter where we live. No matter what bank we trust with our deposits.

So let’s have it, nice and easy as always, shall we?

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🤑 Bail-outs

If you’re in your 20’s or older, you likely remember the Great Financial Crisis. You know, that event in 2008 to 2010 that pushed major banks to the edge of catastrophic-level collapse because of poor—or non-existent—risk management policies?

And as a consequence for their actions, their lack of fiduciary oversight, many, or shall I say most, of these banks received the due punishment they deserved.

The companies went bankrupt. The managers lost their bonuses, many were fired and many arrested, and they were all left to deal with a life of shame and poverty.

Well, no.

If you remember correctly, none of that happened.

The CEOs and managers received their fat bonuses. They kept their seats. They remain in power and are wealthy beyond imagination.

How?

Government led and government funded bail-outs.

They screwed up. They lost money. They threatened to collapse the entire financial system with their sheer stupidity and arrogance.

And they got bailed-out.

With our taxpayer-funded dollars.

Actually, the Fed and Treasury printed money to do it, but we’re all paying for it, make no mistake. It’s just hidden from us through monetary manipulation and inflation. Items tucked nice and neatly away in a gnarled mess of Treasury and Fed balance sheet assets and liabilities (read: I owe you’s and you owe me’s).

Flash forward to 2023, and we have a few messes creeping up again.

UK pension funds over-levered with LDIs? On the verge of collapse?

If you want to know more about that, I wrote a newsletter all about the LDI situation that you can find here:

LDIs and the UK Pension Meltdown

TL;DR: The Bank of England bailed them out.

Italy and Spain and Greece struggling with debt and in danger of systematic collapse of their banking systems?

The European Central Bank creates a manipulation called the Anti-Fragmentation Tool.

Wrote about that, too, and you can find it here:

What's an Anti-Fragmentation Tool, and How's the ECB Using It?

TL;DR: Instead of austerity in those countries, the ECB buys their debt to prop them up, essentially handing Germany the mop and the bill.

No consequences. For anyone.

Well, except you and me.

And soon, it could get even worse than the hidden money printing and government led bail-outs with the taxpayers footing the bill.

You got it. This is where bail-ins come into play.