I doubt anyone wants to hear this, but a big secret to our societies' banking systems is that a bank's depositors are in fact
unsecured creditors, individuals or institutions that
lend money to the bank without obtaining specified assets as collateral.
If a bank were to become insolvent in a crisis, its clients could lose all or part of their deposits in a "bail-in", a term coined in the 2010s that describes rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings.
A bail-in is the opposite of a bail-out, which involves the rescue of a financial institution by external parties, typically governments using taxpayers money. Bank bail-ins have already begun in the EU (in Cyprus and Italy), and
the infrastructure to implement bail-ins is already in place in the United States.
Quote:
[It is] entirely possible in the next banking crisis that depositors in giant too-big-to-fail failing banks could have their money confiscated and turned into equity shares...
If your too-big-to-fail (TBTF) bank is failing because they can’t pay off derivative bets they made, and the government refuses to bail them out, under a mandate titled “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” approved on Nov. 16, 2014, by the G20’s Financial Stability Board, they can take your deposited money and turn it into shares of equity capital to try and keep your TBTF bank from failing.
Once your money is deposited in the bank, it legally becomes the property of the bank.
|
(Emphasis mine.)
Quote:
|
The Dodd-Frank act states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.
|
(Emphasis mine again.)
Don't take my word for it: this information is corroborated by reputable sources in plain sight on the internet, and you can do your own research. You can start with the following article:
A Crisis Worse than ISIS: Bail-ins Begin