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If you thought the Coinbase bankruptcy disclosures were bad…

May 16, 2022

If you thought the Coinbase bankruptcy disclosures were bad…

Just wait ’til you see your government’s bail-in rules

One of the subplots that made for a bad week in crypto included a largely manufactured crisis around “The Coinbase bankruptcy disclosure”.  After posting an earnings miss, the next shoe to drop was the discovery in the latest version of the Coinbase Terms of Service, the addition of text that included the following:

“Custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”

This verbiage became a big deal with every corporate media outlet dumping all over it. It trended on Twitter and quickly went viral, almost as if this was some sort of revelation.

It’s not. It’s basically the oldest adage in crypto, “not your keys, not your coins” spelled out in writing.

Do you really think if you’re holding your crypto on some exchange that suddenly becomes insolvent it’s going to make a difference if a paragraph to that effect appears in the ToS or not? Good thing Mt Gox or QuadrigaCX didn’t have that in their ToS otherwise everybody with assets in either exchange would have been really screwed, right?

You’re screwed no matter what. At least Coinbase is calling your attention to it.

Don’t hold your crypto on the exchange, any exchange, full stop. Even the largest crypto exchange CEOs will tell you that.

But if you’re one of those people for whom this is something to be up in arms about, I’ve got news for you:

…click on the above link to read the rest of the article…

Bank Bail Ins Begin as EU Bank “Bailed In” In Austria

April 11, 2016

Bank Bail Ins Begin as EU Bank “Bailed In” In Austria

Bank bail ins in the EU are here after Austria’s financial markets regulator FMA imposed a hefty haircut on creditors in an Austrian bank. Creditors in the bank Heta Asset Resolution will receive less than half of their money back according to the country’s financial regulator, the FMA.

euro_drachma

Senior bondholders in the so called “bad bank” could expect to receive around €0.46 for each euro which would be paid from the realisation of assets by 2020, according to the FMA statement. It said that this had been calculated using “very conservative” assumptions.

“This package of measures also ensures the equal treatment of creditors. Orderly resolution is more advantageous than insolvency proceedings,” the FMA said.

Bond maturities, however, will be extended to 31 December 2023 as “all currently outstanding legal disputes will realistically only be concluded by the end of 2023”. “Only at that point will it be possible to finally distribute the assets and to liquidate the company,” the regulator said.

In November 2015, the largest collection of creditors, which included Pacific Investment Management Co (PIMCO), Commerzbank , FMS Wertmanagement AoeR and a collection of distressed debt investors, proposed to extend bond maturities for 30 years in return for repayment in full.

Representatives of Austrian province Carinthia and creditors of the failed regional lender are to meet in London tomorrow to try to break the impasse over a bond buyback scheme, an Austrian newspaper reported. Carinthia, a southern Austrian province, guaranteed the debt of local lender Hypo Alpe Adria before the bank collapsed and now faces the threat of insolvency if it had to honour the 10.8 billion euro ($12.3 billion) debt in full.

Heta Asset Resolution was formed to wind down the bank but regulators froze Heta’s debt repayments after discovering a gaping capital hole at the bad bank.

…click on the above link to read the rest of the article…

Happy New Year — Bail-In Passed for Europe’s Banks

December 30, 2015

Happy New Year — Bail-In Passed for Europe’s Banks

ECB

The mainstream media is not extensively reporting on the “experimental” bail-in that the EU imposed on Cyrus. The bail-in, that they swore would never be applied to Europe, will officially begin in January. This new power will be in the interest of taxpayers as they will no longer be forced to pay for failed banks that were created by the childish structure of the euro that was created by lawyers who never understood the economy. But wait a minute — aren’t taxpayers the people with deposits in banks? Hm. Moving to electronic money is also about preventing bank runs. The bottom-line here is that they will just take your money to save bankers. Eliminating cash accomplishes two things: (1) they get to tax everything, and (2) you cannot withdraw money from banks.

The bail-in directive was agreed upon on January 1, 2015, and the bail-in system will take effect on January 1, 2016. So here we are, just in case you missed this one. Their website states:

Parliament and Council Presidency negotiators reached a political agreement Wednesday on the draft bank recovery and resolution directive, the first step towards setting up an EU system to deal with struggling banks. This directive will introduce the “bail-in” principle by January 2016, thereby ensuring that taxpayers will not be first in line to pay for bank failures.

The entire system of insuring banks after their collapse during the Great Depression was to restore confidence to end the hoarding and revitalize the economy. Now they have allowed bankers to do everything they did before, and they have reversed the insurance created to restore confidence in banking. They justify this by claiming taxpayers will not have to pay for the failed banks.

…click on the above link to read the rest of the article…

A Crisis Worse than ISIS? Bail-Ins Begin

December 29, 2015

A Crisis Worse than ISIS? Bail-Ins Begin

While the mainstream media focus on ISIS extremists, a threat that has gone virtually unreported is that your life savings could be wiped out in a massive derivatives collapse. Bank bail-ins have begun in Europe, and the infrastructure is in place in the US.  Poverty also kills. 

At the end of November, an Italian pensioner hanged himself after his entire €100,000 savings were confiscated in a bank “rescue” scheme. He left a suicide note blaming the bank, where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, which have imposed an “Orderly Resolution” regime that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the “rescue.”

The pensioner’s bank was one of four small regional banks that had been put under special administration over the past two years. The €3.6 billion ($3.83 billion) rescue plan launched by the Italian government uses a newly-formed National Resolution Fund, which is fed by the country’s healthy banks. But before the fund can be tapped, losses must be imposed on investors; and in January, EU rules will require that they also be imposed on depositors. According to a December 10th article on BBC.com:

The rescue was a “bail-in” – meaning bondholders suffered losses – unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros.

Correspondents say [Italian Prime Minister] Renzi acted quickly because in January, the EU is tightening the rules on bank rescues – they will force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders.

. . . [L]etting the four banks fail under those new EU rules next year would have meant “sacrificing the money of one million savers and the jobs of nearly 6,000 people”.

…click on the above link to read the rest of the article…

European Banks At Risk Of Bail-Ins In 2015 – Moody’s and S&P Warn | www.goldcore.com

December 9, 2014

European Banks At Risk Of Bail-Ins In 2015 – Moody’s and S&P Warn | www.goldcore.com.

Europe’s banks are vulnerable in 2015 due to weak macroeconomic conditions, unfinished regulatory hurdles and the risk of bail-ins according to credit rating agencies.

The economic outlook for European banks in 2015 will be hampered by weak profits, risks of bail-ins and litigation charges, Moody’s Investors Service announced Monday.

“Weak macroeconomic conditions will continue to weigh on Europe’s banking sector in 2015 and banks’ low overall profitability implies that Europe’s banking sector remains structurally vulnerable,” Moody’s Europe, Middle East and Africa financial institutions group managing director said in a statement.

“The European banking industry remains structurally vulnerable,” said Carola Schuler, managing director at Moody’s, in a presentation on the sector’s outlook.

The agencies said moves to reduce implied government support for the banking sector and force bank debt holders to participate by coming to the aid of wayward lenders would also put downward pressure on bank ratings.

…click on the above link to read the rest of the article…

New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners | WEB OF DEBT BLOG

December 2, 2014

New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners | WEB OF DEBT BLOG.

On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking.

Russell Napier, writing in ZeroHedge, called it “the day money died.” In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.

Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds.

“Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors.

…click on the above link to read the rest of the article…

Russell Napier Declares November 16, 2014 The Day Money Dies | Zero Hedge

November 12, 2014

Russell Napier Declares November 16, 2014 The Day Money Dies | Zero Hedge.

It is with regret and sadness we announce the death of money on November 16th 2014 in Brisbane, Australia 

 
 

‘A mark, a yen, a buck, or a pound
A buck or a pound
A buck or a pound
Is all that makes the world go ’round;
That clinking, clanking sound
Can make the world go ’round.’

      “Money” from Cabaret by Kander & Ebb

In the musical Cabaret, Sally Bowles and the Emcee sing about money from the perspective of those witnessing its collapse in value in real terms in the great German hyperinflation of 1923.

Less than a decade later, and a continent away, a young lawyer from Youngstown, Ohio noted on July 25th 1932 how money’s value could also fall in nominal terms:

 
 

“A considerable traffic has grown up in Youngstown in purchase and sale at a discount of Pass-Books on the Dollar Bank, City Trust and Home Savings Banks. Prices vary from 60% to 70% cash. All of these banks are now open but are not paying out funds.”

      The Great Depression – A Diary: Benjamin Roth (first published 2009)

In Youngstown the bank deposit, an asset previously referred to as “money”, had fallen by up to 40% relative to the value of cash. The G20 announcement in Brisbane on November 16th will formalize a “bail in” for large-scale depositors raising the spectre that their deposits are, as many were in 1932, worth less than banknotes. It will be very clear that the value of bank deposits can fall in nominal terms.

…click on the above link to read the rest of the article…

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