WC Varone
by W.C. Varones
March 17, 2013

There's two bulls standing on top of a mountain. The younger one says to the older one: "Hey pop, let's say we run down there and f*** one of them cows". The older one says: "No son. Lets walk down and f*** 'em all".- Robert Duvall in Colors

The world was shocked this weekend to learn that the European Union would fund the bailout of Cyprus by confiscating the assets of ordinary bank account holders. Core Europeans and Americans no doubt comforted themselves that such a confiscation could never happen here. They would be wrong. In fact, it already has happened here.

(excerpted)
http://www.wcvarones.com/2013/03/think-c...en-here-it.html

And here's how;

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What occurred this weekend in Cyprus was a theft from responsible savers to benefit irresponsible banks. Small depositors get screwed while bank bondholders (largely other banks and large institutions) get made whole. Which, it turns out, is exactly what has happened in the U.S. the past five years.

Bank CD rates were around 4% in 2008. Since that time, the Federal Reserve's interest rate manipulation has kept CD rates pinned between 0% and 1%. This has allowed the banks to borrow at near-zero, whether from depositors or directly from the Fed, and invest in Treasuries or mortgage-backed securities earning 2%, 3%, or more. Using this free-money interest rate spread, banks have indeed earned their way back to solvency. But savers have had their 4% annual interest confiscated by the Fed.

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Being a member bank of the Fed has other perks.

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Member banks must subscribe to stock in their regional Federal Reserve Bank in an amount equal to 6 percent of their capital and surplus, half of which must be paid in while the other half is subject to call
. . .
Member banks receive a 6 percent dividend annually on their stock, as specified by law
. . .
http://www.federalreserve.gov/pf/pdf/pf_complete.pdf

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