Could Asset Seizure Ever Happen in the U.S.?
The heist was pulled off by their government instead of a masked deviant
by Kate Rogers
In a way, some Cypriots were victims of a bank robbery today. Only the heist was pulled off by their government instead of a masked deviant.
As part of a last-minute $13 billion deal with international lenders to prevent the country from financial collapse, deposit-holders with more than 100,000 euros will face big losses. Up to 40% of the assets large depositors, including many Russians, believed they had safely stored in Cypriot banks were seized after the European Union approved the deal.
In the U.S., large investments of more than $250,000 in banks are insured by the Federal Deposit Insurance Corporation. But amid the unrest in Cyprus and our own uneven economic recovery, could the U.S. government ever seize depositors’ assets to avoid a banking collapse?
Very simply, no, says Marc Chandler, global head of currency strategy at Brown Brothers Harriman. For starters, the banking structure in the eurozone is different from U.S. banks. “Even if you have your money in a New York bank [and live in a different state], your deposits are insured by the federal government. In Europe, insurance is on the state level.”
Capital structure is also different in U.S. banks, Chandler says. U.S. banks are also funded through stocks and bonds in addition to deposits, where Cypriot banks rely solely on depositors.continue reading »