Will the Government Seize Your Money Cyprus-Style?

Here’s what Bernanke says (go to 47:36 to hear the question and answer):

Here’s what George Washington replies on ZeroHedge.com:

Bernanke’s response is unsatisfactory for 2 reasons.

Initially, the FDIC only insures deposits up to $250,000. So deposits over that amount are unprotected.

Indeed, the FDIC has, in fact, come very close to being insolvent at various times.  See the following articles from the New York Times, American Banker, Bloomberg, Zero Hedge and Mish.

True, the Treasury Department would likely just bail out the FDIC if the FDIC really went belly up. But that would take a political act of will.  And so Bernanke should have said, “we will always make sure the FDIC has enough money”.

Second – and more important –  Bernanke failed to answer the question altogether.   The question was not about whether the government would save bank depositors from economic conditions caused by others.  The question was whether the government itself would grab deposits.

People didn’t think any European country would seize bank deposit assets.  But the EU demanded that the government of Cyprus seize private bank deposits.  The attempt of a government to seize  private property is undermining confidence in Europe … and many people worry that that contagion will spread.  That is what the question was about.

Bernanke entirely failed to answer the question which was actually asked … and has thereby caused a tsunami of distrust on the Internet.

In the same way that the Department of Justice’s wishy-washy assurances that it probably wouldn’t assassinate Americans on U.S. soil hasn’t reassured anyone, Bernanke shouldn’t have given a half-hearted reply.

Indeed, more and more Americans realize that the government has bailed out the super-elite of the big banks,  and enabled their fraud … while  hosing the little guy again and again (and again). People see that we have socialism for the rich, but cut-throat, sink-or-swim capitalism for everyone else.   They see that we have a malignant synergism between D.C. politicians and giant companies. Look here, here, here.

Indeed, after Wall Street giants such as MF Global and JP Morgan got caught seizing segregated client funds – but were never prosecuted by the government – both amateur and sophisticated investors have lost trust in the American financial system and financial regulators.   (It has become obvious to all that the government is trying to cover up for the stunning crimes of the big banks.)

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