Very interesting FDIC document regarding TBTF banking collapse

[devil21]

Pretty much the official blueprint for TBTF actually failing. Are depositors considered "shareholders"? If so, this explains the rationale behind the Cyprus account seizures.

http://www.fdic.gov/about/srac/2012/gsifi.pdf

 

[sailingaway]

No. SPAIN raided the shareholders and bonds, but that is standard in bankruptcy, those took a certain business risk, shareholders more, then bonds according to their level of preference. but they didn't say SPAIN would be the blue print for future, but that Cypress would be. Wonder why?

 

[pp0rker]

Pretty much the official blueprint for TBTF actually failing. Are depositors considered "shareholders"? If so, this explains the rationale behind the Cyprus account seizures.

http://www.fdic.gov/about/srac/2012/gsifi.pdf

A depositor is considered an "unsecured creditor" to the bank. What I get from the doc is that as an unsecured creditor, if the bank goes under then the depositor funds will be taken to pay secured creditors. The scam though is that the depositor has "deposit insurance" provided by the government for up to the limit amount. The problem of course is that the deposit insurance is itself "unsecured" and based entirely on the "full faith and credit" of the government. As anyone old enough to remember the S&L crisis of the '80's can attest, the depositors who were insured by the FSLIC were lucky if they got $0.40 on the dollar of their so-called "insured" deposits. Of course, the uninsured deposits were a 100% loss.

We don't hear much about how the FSLIC failed to actually protect people's deposits. If there is a general bank failure in the US, my guess is that the payout by FDIC will be much less than $0.40 on the dollar. FDIC is insurance in name only.

 

[Seraphim]

YES.

People need to realize that if you deposit cash in a bank you are an UNSECURED CREDITOR to the bank. You are NOT saving money - you are lending it to the bank. PERIOD.

A depositor is considered an "unsecured creditor" to the bank. What I get from the doc is that as an unsecured creditor, if the bank goes under then the depositor funds will be taken to pay secured creditors. The scam though is that the depositor has "deposit insurance" provided by the government for up to the limit amount. The problem of course is that the deposit insurance is itself "unsecured" and based entirely on the "full faith and credit" of the government. As anyone old enough to remember the S&L crisis of the '80's can attest, the depositors who were insured by the FSLIC were lucky if they got $0.40 on the dollar of their so-called "insured" deposits. Of course, the uninsured deposits were a 100% loss.

We don't hear much about how the FSLIC failed to actually protect people's deposits. If there is a general bank failure in the US, my guess is that the payout by FDIC will be much less than $0.40 on the dollar. FDIC is insurance in name only.

 

[LibForestPaul]

Which holders are considered secured creditors?

 

[devil21]

A depositor is considered an "unsecured creditor" to the bank. What I get from the doc is that as an unsecured creditor, if the bank goes under then the depositor funds will be taken to pay secured creditors. The scam though is that the depositor has "deposit insurance" provided by the government for up to the limit amount. The problem of course is that the deposit insurance is itself "unsecured" and based entirely on the "full faith and credit" of the government. As anyone old enough to remember the S&L crisis of the '80's can attest, the depositors who were insured by the FSLIC were lucky if they got $0.40 on the dollar of their so-called "insured" deposits. Of course, the uninsured deposits were a 100% loss.

We don't hear much about how the FSLIC failed to actually protect people's deposits. If there is a general bank failure in the US, my guess is that the payout by FDIC will be much less than $0.40 on the dollar. FDIC is insurance in name only.

Very informative, thanks. That definitely helps to understand how the Cyprus bank shenanigans have played out. Looks like any major bank failures here (and elsewhere) will become nothing more than seizures of accounts. The days of fed bailouts may be over and any bailout comes directly from YOU.