Were you appalled at what happened to the bank depositors in Cyprus? Most of us were; one doesn't expect depositors to have their money confiscated... let's be blunt: stolen... to bail out failing banks. But it could happen in the US and the UK. Ah, you say, but the FDIC will save you? Uh-uh. It's the FDIC that is cooking up plans to raid the depositors' accounts. Your money would be at risk for all the shaky derivatives and such that the bank might have unwisely invested in. How do you like them rotten apples?
As a depositor, you already cede your money to banks in exchange for a promise to repay it to you in cash on request; that's the basic arrangement of ordinary banking. The threat now is to the second part of that. Under the proposed new arrangement, you would still cede your money to a bank, and in exchange receive not a promise to pay, but a sort of equity in the bank. If the bank went belly-up, you would be a "stockholder" in the failed bank, with all the losses... and responsibilities... that holding equity entails. And you would have no choice in the matter: you would have no option to retrieve your money in cash.
My mattress is beginning to look better all the time...
