Earlier this week, I noted that the banks in Cyprus will be opening Thursday, once the regular people had time to embrace the levy and understand all the awesome goodness in the new bailout plan.
Shockingly, the Cypriots are still not down with the political solution to the banking crisis. Guards are now being posted in front of banks, in anticipation of Thursday’s return to business:
Cyprus reopens its banks on Thursday while limiting withdrawals, banning cheques and curbing the use of Cypriot credit cards abroad, among measures imposed to avert a bank run after it agreed a tough rescue deal with international lenders.
The Central Bank said banks would open their doors at midday (6 a.m. EST) on Thursday after nearly two weeks when Cypriots could only get cash through limited ATM withdrawals.
A central bank official said Cypriots would be allowed to withdraw no more than 300 euros ($380) a day.
This action indicates that Cypriot authorities are deeply concerned about a fiscal emergency.
Meanwhile, Germany’s Der Spiegel has a report that not every affected depositor is taking a hit (hat-tip, W.C. Varones). Actually, this news may explain the need for guards to protect the banks from “the little people”.
Most of all, though, the central bank head has been harshly criticized due to the suspicious capital flight from Laiki and the Bank of Cyprus, the two institutions that have been hit hardest by the Cypriot banking crisis. There are indications that large sums flowed out of the two banks just before the first bailout package was signed in the early morning hours of March 16. At the end of January, some 40 percent of all savings held in Cypriot accounts were on the books of those two banks. Since then, however, much of it has been transferred elsewhere, despite orders from the central bank that accounts at the two institutions be frozen.‘Special Payments’The central bank now stands accused of not doing enough to control the movement of capital. Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed “special payments,” the definition of which was never adequately established.The Cypriot central bank has defended itself by saying that it was impossible to completely prevent all transactions, despite the account freeze. Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.Such a defense is nothing less than a voluntary admission of impotence. Holders of smaller savings accounts have been unable to access much of their money for almost two weeks, companies have been unable to pay their suppliers and across the country people are concerned that their salaries will not arrive on schedule on the first of the month. Meanwhile, rich businesspeople and those with connections overseas have been able to transfer their money into foreign accounts.
In fact, the first ripples of this fiscal tsunami are being reported in the Financial Times by a Laiki client, one of the “regular” citizens:
On Monday, EU officials pronounced Cyprus saved after the country agreed terms with international lenders on a €10bn bailout.
On Tuesday morning, Elena Antoniou, a Cypriot interior designer, fired her staff.
“I told them, ‘Guys, three months of part-time and then we’re closing’,” Ms Antoniou recalled. Her firm had been working on a 3,000 sq m project at the insurance arm of Laiki, the country’s second-largest bank. But, as a condition of the bailout, Laiki is now in liquidation.
Ms Antoniou’s contractor on the project was a Laiki customer. With his accounts at the bank frozen, he has let go of all but six of his 25 staff. “He called me this morning and said, ‘I’m terrified. I’m ruined’,” she said.
And the once the first wave hits Cyprus, there will be no telling how far it travels.
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Comments
Some people wonder what kind of cheap grace Warren Buffet thinks he’s buying by going along with the Obama/progressive/Trotskyite program.
“Special payments” is the answer.
They’ll tell you it could never happen here.
They lie.
Already happened.
Source: http://www.wcvarones.com/2013/03/think-cyprus-cant-happen-here-it.html
Is anyone at all surprised that some favored few were given a quiet warning that bank controls were going to be implemented, and thus they’d better move their money while they could?
Anyone at all? Anyone? Bueller?
Anyone at all want to bet on how many Russian ‘customers’ of these two banks were able to get their money out?
Of course Cyprus (and the EU) needs to close the banks, clean up the mess, use depositor insurance to pay off the small holders, and let the larger holders fend for themselves. They’ll eventually get around to doing that but note the contrast between there and the FDIC here: when we do this the first thing anyone hears about it is when you drive by the bank and it has a new name, and the FDIC issues a five line press announcement.
This situation has been horribly mis-managed from the start and all parties are to blame, including the ordinary schmos in Cyprus. But now the rest of us are going to pay.
Correct. We have our own version of “ordinary schmos in Cyprus,” they sent Barack Obama to the White House, twice. Having done so a second time with four years exposure in front of them makes them more “marks” and fools than schmos and is probably unfair to the world’s schmos.
“Special Payments”? It’s not a tax, it’s a depositor fee!
Anyone remember Steve Martin’s routine about “Fred’s Bank”? I’m beginning to think that saving at Fred’s bank is more secure than “FIRST NATIONAL SAVINGS AND LOAN”
Keating Five Redux? hmmmmmm……
Keating Five is right, though I guess it goes back to letting the private bankers call themselves “Federal Reserve” and give them control of interest rates, another deal snuck in Christmas eve (well, Dec 23rd, 1913).
And how did the S&L fiasco grow so big?
I think Long Term Capital was the next major heist by the rich of the plebs. Leveraged 300:1 made for great income and the drinks were flowing at the elite cocktail parties. when that collapsed, it was again up to Joe the Plumber to bail them out. And when NY and NJ lean on DC for Big Sandy money, they get an extra $40 billion in pork.
The die has been cast … Obama threw around $90 billion of green money to his friends, yet most think Cyprus is an aberration. But it should be a wake up call to just how brash the politicians really are when it comes to protecting their billionaire cartels. Private assets are “fair game”, and we may need another revolution.
just got around to reading the rest of my link, which I forgot to link. I fear so many con men confiscated so many billions long ago, that they now own the system, which is why our world is so Orwellian.
http://www.thirdworldtraveler.com/Corporate_Welfare/S%26L_Bailout.html
I love this–it brings to mind images of a board room full of business-suited guys and one poor sod with his beanie cap in his hands, with the others nodding seriously while one holds out his hand in expectation of deliverance of the single coin the lone man has in his possession.
“Awful nice bank you got there; be a shame if something happened to it.”
Cyprus is a microcosm of what’s to come. It was depressing to hear Charles Krauthammer mock the situation because of the modest size of Cypriot banking in relationship to Apple. He’s usually smarter than that, but then, he is a Beltway insider.
With all due respect to lawyers and our laws—and very little remains—why is anyone be surprised that truckloads of capital are permitted to flee out the back door of banks while armed guards are posted out front to prevent others from withdrawing a wallet full of bills? It’s all perfectly “legal.”
In our otherwise indecipherable laws, the sub-sections and clauses that provide exemptions and waivers for politicians, insiders, and their friends are always crystal clear.
In a more perfect world Barack Obama would suffocate in a monstrous pile of paper composed of his worthless laws and paper currency, Ben Bernanke and Tim Geithner would drown in a big bucket of ink.
Once again the ‘market’ sails into the weekend on winds of unknown origin and bolstered by media talking heads desperatly grasping at any positive news however small. Now the newsspeak media is trying to talk down the price of the only true store of wealth…GOLD. In a time of unbelievable upheaval in the financial engineering of the world the only reason gold prices are suppressed is to allow central banks to stock up at these levels.
This article lays bare the next in line for a ‘bail-in’ to prop up bad decisions made to borrow money they could not pay back and the mindless greed of central banks and the IMF to be made whole at the expense of depositors.
http://www.zerohedge.com/news/2013-03-28/when-will-deposit-haircuts-take-place-other-european-countries-complete-bad-debt-imp
My statement to central bankers:
I suppose you are in favor of an unelected ‘Supercommittee’ of bankers consisting of Ivy League educated scholars with politicians playing the part of their sychophant pool boy & the rest of us playing the part of their ornamental lawn boys wearing jockey silks…