Bail-Ins: The Legal Framework is in Place to Continue Looting the American Public.

At the expense of the American public (devastating austerity and elimination of the middle-class), 2008 ushered in government bail-outs in order to preserve Wall Street's corrupt and bankrupt system., but what about government bail-ins (confiscation of bank deposits), the likes of which we saw occur in Cyprus, Greece? In addition to bail-outs, so far, we've been witness to severe austerity measures targeted at the masses, including sequestration, a dog-and-pony-show government shutdown, and massive cuts to food stamp that essentially puts a stranglehold on economic recovery (for the masses), not to mention the threat of default. There is no doubt that the intention is to strip away what is left of the social safety net at a time when its most needed. Meanwhile, J.P. Morgan, Goldman Sachs, Bank of America, Citibank, Deutsche Bank, etc., have not only evaded any and all consequences of their egregious actions, they are generously rewarded as they continue to gamble with taxpayer money. It doesn't take a rocket scientist to see what's going on here.

These austerity measures disproportionately affect children, seniors, and people with disabilities. According to the Center on Budget and Policy Priorities (CBPP), this recent $5 billion cut will average less than $1.40 per person per meal and jeopardize the strength of the current economic recovery. Moreover, according to the Center for American Progress (CAP) "each $1 billion dollar reduction in the Supplemental Nutrition Assistance Program eliminates 13,718 jobs," resulting in more than 68,000 job losses in the coming year.

Keep in mind that programs such as SNAP have what economists call a "multiplier effect"—in other words, "a dollar given to an entitlement recipient has amplified economic benefits. In this case, those consist primarily of the grocers who benefit when food stamp users shop in their stores. The estimated multiplier effect for food stamps is as high as 2 to 1."

The report, "Nourishing Change: Fulfilling the Right to Food in the United States," released by the International Human Rights Clinic (IHRC) at the New York University School of Law is timely as our government cut at least $5 billion-with many more cuts to come-- from the government's already inadequate $80 billion food stamp program, Supplemental Nutrition Assistance Program (SNAP), in the Farm Bill.  This report cites a study by the Center for American Progress, that calculates the "hunger bill" for the country, which includes the costs of treating illnesses and other medical conditions related to food insecurity, the impact of hunger on educational outcomes and lifetime earning potential, and the costs of running charity-based emergency food programs. For 2010, that bill came to $167.5 billion. For about half of that, $83 billion, the Center says we could extend the SNAP program to all food insecure households.

Okay, back to bail-ins.  It's the Dodd-Frank Act that passed in 2010-- it took up 848 pages at the time, as of July 2012 an additional 8,843 pages of rules were added, representing only 30% of the rules to-be-written. The estimate for the final length of the Act is 30,000 pages --that provides the legal framework for bail-ins.

According to the April 24, 2012 IMF report, conversion of bank debt to stock is an essential element of bail-in included in Dodd-Frank. “The contribution of new capital will come from debt conversion and/or issuance of new equity, with an elimination or significant dilution of the pre-bail in shareholders. ...Some measures might be necessary to reduce the risk of a ‘death spiral’ in share prices.” In the language of Dodd-Frank, this will “ensure that unsecured creditors bear losses.”

Under the existing legislation, the FDIC has the power to impose losses on unsecured creditors in the process of resolving failing banks. For example, the FDIC resolved Washington Mutual under the least-cost resolution method in 2008 and imposed serious losses on the unsecured creditors and uninsured depositors (deposit amount above USD 100,000). The Orderly Liquidation Authority (OLA) established under the Dodd-Frank Act further expands the resolution authority of FDIC. Subject to certain conditions, the FDIC now also has the powers to cherry-pick which assets and liabilities to transfer to a third party and treating similarly situated creditors differently, eg: favoring short-term creditors over long-term creditors or favoring operating creditors over lenders or bondholders. -- Economist, Nouriel Roubini

The U.S. is far from the only nation with provisions for bail-ins:

Bail-In Rules for Eurozone Banks Should Start In 2016

Bondholders Bail-in Shows Alternative Method to Rescue Banks

Bank Bail-in Rules Confirmed


But who cares, right? The stock market's soaring to new heights while income disparity continues to widen at unprecedented levels.