Basically, it's what we have been watching in Cyprus, and will soon be watching in Greece, Spain, Portugal and all the other socialist hellholes of Old Europe, and it's coming soon to a bank lobby near us: Stealing our money to recapitalize the casino:
An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.
Actually, we will get hit twice: First by having our deposits converted to bank stock---which may end up being worthless anyway---and then a tax hit to cover the FDIC's insurance exposure. Then again, look on the bright side: those three-hour queues at the ATM machine after BofA or JP Morgan fails are sure gonna be fun---particularly when you consider how many people in this country, unlike in Cyprus, have guns.
(Via.)
---Baron V
Comments