The Dodd act of our last meltdown established “ Bail-ins”. The opposite of Bail outs.
Bail Ins have already been used in the EU and other countries. A Bail In states a depositors money deposited in a bank belongs to the bank as “ Primary” account holder. Reasoning: The Rule treats your cash like an investment, you gave it to the bank and they invest it.
The way it has been done in the past is on declared insolvency, the account holder is given stock in the bank equal to his deposits, which he can not sell for three years.
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“Bank Bail-In vs. Bank Bailout
Bail-ins and bailouts are designed to prevent the complete collapse of a failing bank. The difference between the two lies primarily in who bears the financial burden of rescuing the bank.
In a bailout, the government injects capital into banks, enabling them to continue their operations. During the financial crisis of 2007-2008, the government injected $700 billion into companies like Bank of America (BAC), Citigroup (C), and American International Group (AIG) using taxpayer dollars.
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Bail-ins provide immediate relief when banks use money from their unsecured creditors, including depositors and bondholders, to restructure their capital. Banks can convert their debt into equity to increase their capital requirements. Banks can only use deposits over the $250,000 protection provided by the Federal Deposit Insurance Corporation (FDIC)…*Since the principal objective of the provision is to protect American taxpayers, banks that are too big to fail will no longer be bailed out by taxpayer dollars. Instead, they will be bailed in.”
I will add the recent Bail Out ( SNB California failed bank) the Dodd Bail In provision was WAIVED, illegally. More than a few Congressmen brought this issue up, but were overridden by Democrats.
That said, the FDIC “ insurance” account only has a FRACTION of money held in reserve to cover trillions in deposits. In the event of widespread bank closures all accounts WILL be subjected to the Dodd Rule.
It pays to be informed- when I ask people what a Bail In is, ALL have no idea what so ever.
Best to read the link I posted, much disturbing information is found.