Bank Deposits Safe?

Here is another interesting post by our Law Clerk John Ellis.

I’ll bet you thought that when you deposited your money in the bank, it was still your money. Guess what? It’s not. When you put your money into a deposit account at your local “too-big-to-fail” bank, it becomes the property of the bank, and you become merely a general unsecured creditor of the bank, with a claim against the bank. This is problematical, because derivatives counterparties now are given super-priority status in bankruptcy over all other creditors and customers of the bankrupt financial institution, including FDIC-insured depositors. So, when (not if) the next big derivatives bet goes sideways in the Wall Street “derivatives casino,” it may well be your money that is used to “bail-in” your bankrupt financial institution. That’s right. You may well be looking at taking a “financial haircut” from your bankrupt financial institution, in exchange for worthless bank stock. When a similar “deposit confiscation” scheme recently was implemented in Cyprus, there was open rioting in the streets. As a depositor, it looks as if your best bet right now might well be “a shotgun and a mattress.”

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Mark A. Goodman, Esq.