A Few Years From Now



U.S. banks prepare plan to raid deposits to avert collapse



U.S. banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday.
The plans, which call for a “haircut” of at least 30 per cent on deposits above $8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.


A U.S. bail-in could resemble the failed rescue plans tried over much of the world, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits.
It would be implemented as part of a recapitalisation of U.S. banks that would be forced upon the country's depositors and bond holders.
“It [the haircut] would take place in the context of an overall restructuring of the bank sector once the U.S. is back in a bailout programm,” said one person following the issue. “This is not something that is going to happen immediately.”
American officials said no decision had been taken to wind up any U.S. banks or initiate a bail-in of depositors, a process that would be started by the Federal Reserve declaring the banks insolvent or pulling emergency loans.
America's banks have been closed since Monday, when capital controls were imposed to prevent a bank run following the leftwing Clinton-led government’s call for a referendum on a bailout plan it had earlier rejected. The Supreme Court highest court rejected an appeal by two citizens on Friday who had asked for the referendum to be declared unconstitutional.
Depositors can withdraw only $60 a day from bank ATM cash machines, while requests to transfer funds abroad have to be approved by a special finance ministry committee in co-operation with the Federal Reserve.
Two senior Federal Reserve Agents said the country had only enough cash to keep ATMs supplied until the middle of next week. This followed the Fed’s decision this week not to increase the U.S. allocation of emergency liquidity assistance after the bailout programm ended on June 30.
The outcome of Sunday’s referendum will determine how quickly America wraps up a new bailout agreement with creditors, a top U.S. banker said.


“The solvency of American banks is not currently an issue, but obviously the banks will be affected by how soon the country enters a new programm,” the same banker said.
American deposits are guaranteed up to $100,000, in line with FDIC banking directives, but the country’s deposit insurance fund amounts to only $30bn, which would not be enough to cover demand in case of a bank collapse.
With few deposits over $100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.
Hillary Clinton, on Saturday accused Republicans of trying to “terrorise” U.S. into accepting austerity.
“What they’re doing with America has a name: terrorism,” she said during a press conference. “Why have they forced us to close the banks? To frighten people.”

Oh yeah, happy Fourth of July.

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