As a result of recent changes to the rules governing the
financial system operating throughout the G20 nations, a serious threat has
arisen to the finances of individuals, families, and institutions that have
entrusted their assets to major banks.
Here's the situation: in case
"systemically important" banks should fail, they are now authorized
to take over the assets of their clients, including our deposits! This
procedure is known as a "bail-in”—as distinguished from a
"bail-out”—and it has already been implemented in Cyprus. This threat has
been thoroughly documented by Ellen Hodgson Brown (author of two extraordinary
books on our money system, The Web of Debt, and, just published, The
Public Bank Solution), and by the Public Banking Institute, which she
founded. For a vivid, compelling explanation of the crisis provided by the
Institute, see this brief video: http://www.youtube.com/watch?v=f-sHAwNfoL4 . Given the
vast, destabilizing involvement of major banks in derivatives gambling, about
ten times the volume of the real economy as this video shows, major banks are
constantly at risk of failing, and suddenly triggering a bail-in assault on our
assets. The peril is especially clear in
Canada which legalized the bail-in procedure in its 2013 Federal Budget. See: www.policyalternatives.ca/publications/monitor/depositors-beware . But this
bail-in agenda was mandated for all the G20 nations at their 2011 meeting, and
it is likely to be reenforced by provisions of the CETA and TPP, the vast
so-called “trade agreements” presently being negotiated.
Having been assured that the bail-in rescue plan is readily
available in case they fail, banks are all the more likely to participate in
speculative activity. When driven to
insolvency by their losses in derivatives gambling, the losing banks' first
priority must be to pay off the winning banks ("counter parties")
with whatever resources they can muster, now including their clients' assets—our
financial resources. The outrage of
bail-ins includes the "super-priority status" of bank "counter
parties" over our claims as bank clients.
The danger from bail-ins is especially high at the
moment. If the US government on October
17 defaults on its debt, the global financial system, with some $700 trillion
of speculative derivatives churning around, may be thrown into the sort of
chaos that would bring a major financial meltdown, perhaps surpassing that of
2008, with many bank failures resulting in bail-ins, bringing a massive shift
of financial resources from the middle class to the already obscenely wealthy. Even if we escape this immediate
peril—perhaps only temporarily—the threat to our financial welfare from the
banks' speculative excesses remains imminent.
Add to this the proclivity of private banks intentionally to engineer depressions
for their own benefit (there is rich documentation available for this), and the
dangers hanging over us become all the more imminent.
Ultimately it will require persistent political action to
eliminate the grossly unjust bail-in threat—e.g., outlawing bail-ins
altogether, developing public banking, restoring the Glass-Steagall Act (which
separated investment banking—mostly derivatives gambling now—from depository
banking and insurance). But for the
present, what personal actions might we take to protect ourselves? We all need to be seeking alternatives to the
mainline banks that we can no longer trust.
It may be possible for individuals and institutions to find safe haven
for their financial resources by using credit unions. The risk probably differs
from one credit union to another. We need to explore with each specific credit
union the extent to which members' assets are entrusted to major
banks—preferably not at all. We need to
consider becoming active credit union members, constantly vigilant regarding
the safety of our collective resources.
We can no longer take it for granted that our bank deposits are safe.
George Crowell October 7, 2013
