The Causey Consulting Podcast

Bail-ins & Unsecured Creditors - Are You Ready?

February 16, 2023
The Causey Consulting Podcast
Bail-ins & Unsecured Creditors - Are You Ready?
Show Notes Transcript

"We want them to have full faith and confidence in the banking system... there's a select crowd of people that are on the institutional side and if they wanna understand this, they're gonna find a way to understand it." -Gary Cohn at the FDIC SRAC meeting, November 2022.

Key topics:

✔️No more bailouts = bail-ins. Guess who the unsecured creditor is? You!
✔️Rather than using the abstract idea of taxpayer money and God knows what else, let's just clearly shift the risk to John & Jane Q. Public. 
✔️"Now, Wall Street really has full access to your deposits." So that's great. 😣
✔️"Bank of Cyprus depositors lose 47.5% of savings."
✔️At 12:35, the Kitco video shows you exactly what the elites think of the general public! You don't need to know. The public is ignorant. They get financial info and news from tweets like total idiots.  

Links I discuss in this episode:

Links where I can be found:

Need more? Email me:


Welcome to the Causey Consulting Podcast. You can find us online anytime at And now, here's your host, Sara Causey. Hello, Hello, and thanks for tuning in. In today's episode, I want to talk about something else that I think is worthy of our attention and worthy of whatever preparation that you see fit to put into it. Before I even go anywhere, all of my normal disclaimers apply. I am not an economist, a financial planner, a financial advisor. I'm not a credit counselor. I'm not a billionaire or a hedge fund manager for billionaires, not a power broker or a politician. I don't sit on the web. And I'm not privy to all of the arcane discussions that go on behind closed doors. Nothing that I say to you is advice of any kind. It should not be construed as advice of any kind. I sit here and I opine for your entertainment only. And that's all I'm doing now. So now that that's out of the way on with the show, wow. On February 7, Kitco news published a video titled your bank can legally seize your money, too late to stop hyperinflation and the great reset. I'm not exaggerating, when I say that, in my opinion, this video should be mandatory viewing for everybody in the United States. Honestly, I feel like it should be mandatory viewing period. But I think especially if you live in the States, you owe it to yourself to watch this video. It's about an hour long. And that hour flies by and you will learn so much information just from this one video. Is it nightmare fuel? Yes. Will it cause you to perhaps not sleep so well at night? Also? Yes. Is it important as hell, in my opinion that you check it out? A resounding Let the church say amen. Kind of Yes. Yes. And yes. And yes. In the write up for this video on YouTube, we find Lynette Zeng, Chief market analyst at ITM trading talks about how reg D and Dodd Frank Act which are supposed to protect banking clients may allow banks to seize customer funds to bail in the bank in case of a liquidity crunch or financial crisis. She tells Michel McCory, lead anchor and editor in chief at Kitco news that this is all a lead up to C. B. B C's hyperinflation and a surveillance economy, and that it is too late to stop the great r e. S. e. T, from occurring in quote, I'm gonna be honest with you, I agree. I think people who are living in some kind of fantasy land. It's like the art to work from home debate. People who think that if corporate America says come on back, just universally, a handful of people and freelancers are going to be able to work from home, but everybody else needs to come on back. They think that there's gonna be some giant mutiny. Everybody's just going to have one big walk out and refuse to do it. And I'm like, No, they won't. No, they won't. People don't want to be hungry. They don't want to lose their house or their apartment or have the car repoed in the name of having a work from home revolution. And ain't gonna happen. Okay, let me be a little country here and just inform you, it ain't gonna happen. People are gonna go back. I'm sorry to burst your bubble. And so I think in a similar vein, people who believe Well, somehow there's going to be a Hail Mary pass, we're not going to wind up with the SI, MI, Ni, C's, or the great r e s e t. There's going to be that Hail Mary pass. It's going to save us from all of this happening and I'm like, No, it won't. Again, I go back to jet hills, speech and mouse this is the here and then now welcome to the land of you don't have a choice. Another reason why I feel like this particular video is so very important for you to check out because it highlights what I think is coming down the road. So at the beginning of this video, Lynette talks about the US dollar and the currency lifecycle, that everything has a lifecycle and that in her opinion and her assessment We're coming to the end of this currency lifecycle. In this segment, she gives us a fairly horrifying statistic about there being only three cents left out of the dollars original purchasing power. That can't be good news. And as she asked the question in the video, what happens when it hits zero? If you want to look at any of these charts, along with a lot of other cool charts, you can go to, Louis, they have a whole bunch of different charts that you can pull up about GDP per capita relative to and then the relativity of what the dollar is worth. So if you want to go down that rabbit hole, you certainly can't, but three cents left. Holy cannoli. In the second chapter, she gets into bail ins what is a bank bail in versus a bank bail out? And then what is this business about the legal seizure of deposits. One of the things I want to talk about here, if you go to infinite, I'll drop a link to this article. And you will find from bailouts to bail ins understanding the Dodd Frank Act. I'll read on the surface, the Dodd Frank Wall Street Reform and Consumer Act, from January 21 2010, was the most sweeping overhaul of the financial markets since the Great Depression. It was created to provide increased preventative regulation in order to strengthen the financial markets in case of another 2008 type crisis, all button and say so that kind of tells you that they were predicting that was going to happen again. Oops a day see. This new law specifically involves increased capital thresholds for financial institutions mirroring the cross border framework and requirements of the basil three international reforms that were formulated for the banking system of the European Union, by the Bank for International Settlements. Now I'm not going to put on my tinfoil hat about the BIS here in this episode, you can read about their interesting history, why they were formed. What are some of the pies that they've had fingers in at different points in time? Who was allowed to bank there? Let's say oh, no, maybe during the 1940s might be a good good thing for you to check out. Under the heading no more bailouts we find above all the most affirming stance this new law makes is that too big to fail financial institutions will not be bailed out by taxpayer dollars the next time around, in and of itself, this one caveat alone smacks of prudence on the part of our governing officials. After all, it's no secret that the bailouts created one of the worst economic hazards for the helpless American taxpayer compared to any other financial reform to date. In no way was a financial dilemma rectified therefore, protecting taxpayer money became the principal priority of the new US reform. What is incredibly ironic is that since this colossal law was enacted the Federal Reserve and in fact all world central bankers have never been so brazen in their stimulus programs. The near zero interest rates across all borders continue to prod the sophisticated institutional investor, global market trader and in in international investment banker to proceed with business as usual, employing high risk investments and careless credit expansion similar to the period prior to 2008. Meanwhile, the world debt bubble continues growing at an accelerated pace and quote, you know, it's almost like these things are done on purpose. It's almost like the banks don't really make their money by you know, you just doing routine banking transactions there. It's almost like they make their money by loans and interest. Hmm, I wonder if that's maybe the case. I'll continue to read. In particular household debt worldwide has exploded, with debt to income ratios exceeding peak levels and 74% of household debt being directly tied to mortgages. The similarities then to present to present circumstances Excuse me Are eerie. One is left to conclude that perhaps this one caveat and the new banking system rules no more bailouts as somehow created a false sense of security, that our banking and government officials have their hands firmly on the steering wheel, and we have no need to worry. Oh, isn't that another flashback? Gosh, that's the narrative we hear all the time about the labor market. You don't need to worry about that. Glenn Greenwald talked about that and no place to hide. Edward Snowden told him Hey, don't worry about it. It's not your job. We're making decisions where you don't have I'm only information you don't need to worry about it, huh? No need to worry. Yet short of sheer madness, what else can explain these unprecedented numbers in light of diminishing expectations of future economic growth? The masses of society still remain uninformed regarding the particulars of the Dodd Frank Act, even five years since its enactment? Well, it's been longer than that now. But financial experts and economists who understand the details of this law are beginning to voice their doubts as to whether all this excessive regulation is warranted. Or even if it can be actually enforced without creating an even more detrimental hazard to the entire economy at the time of the new crisis. All button, it's a maybe they're hoping it will be even more detrimental. Maybe they're hoping it's going to crash the whole thing. At this point, the only example we have of how a statutory bail in would actually work are the results of the insolvencies of the two largest commercial banks in Cyprus, which occurred in March of 2013. In the end, only one bank was actually shuttered and minimal taxpayer money was required. Consequently, government and banking officials were quite satisfied with the results of the bailing process, except that the stockholders bank depositors and the Cyprus economy did not fare too well, in quote, hmm, I would say that it didn't. On that note, let's hop over for a moment to USA Today, an article that was published on July 29 of 2013, titled Bank of Cyprus depositors lose 47 and a half percent of savings. In the TLDR key points, we find depositors will lose 47.5% of their savings in a bail in to prop up banks. The announcement comes four months after Cyprus has agreed on a rescue package. Depositors taking losses will get shares in the bank, the losses are estimated at around 4 billion euros in quote. Is that coming to a theater near you? Well, I sure hope not. But at the same time, I don't think it's impossible. How would you like to lose half of your savings and then be told? Well, you know, we're going to try and make it up to you by giving you shares in the bank. What the hell kind of bills are you going to be able to pay with that? What kind of hopium is is that? Huh? That is that is heartburn inducing to say the least. I've quoted this Investopedia article before, but I feel like it is so handy. I want to go back to it. Again. If you're not familiar with this idea of what is a bail in versus a bailout, I don't quite understand what's going on here. They have an excellent like TLDR key takeaway section in this article, and I will read it for you now. Big banks were deemed too big to fail following the financial crisis of Oh 708, resulting in government bailouts at the expense of taxpayers. financial reforms ushered in with the Dodd Frank Act, eliminated bail outs and opened the door for bail ins. Bail ins allow banks to convert debt into equity to increase their capital requirements. They shift the risk to unsecured creditors, including depositors whose account balances exceed the FDIC limit of 250k. You can avoid bail ins by spreading your assets across different banks and by monitoring changes in financial regulations and quote, you know, I'll tell you what one important change and financial regulation you better have on your radar screen is what if they lower that limit? In other words, what if the FDIC limit gets lowered and they start reading a lower amount of money from people? Oh, well, that would just never sure of course it wouldn't. Of course it wouldn't. Remember when we were told that all this stuff about No more No more bailouts that was supposed to be a good thing. Like we're not gonna allow the banks to come back with their hat in their hand and ask for sweet taxpayer moolah that's done and over with, oh, surprise. Now that opens the door for bail in so we're going to make you the unsecured creditor, and good luck. All of these power brokers, they all just look out for each other. They're not looking out for you and me. Okay. At 315 in this Kitco video, Lynette really breaks it down. Because the moderator asks are like, Okay, well, most people are still not quite understanding this. What are you talking about? And she says, people think that when they make a deposit at the bank, it's their money. But Legally speaking, when you go and you make a deposit at the bank that belongs to them. I don't think that most people realize that. As Lynette says is when you make a deposit. Legally, you are loaning your money to that bank. long pause so that you can really think about that. Because in my mind, I think a lot of people view the bank as like a vault, I'm putting my money in here. And it's going to sit there and it's going to be safe. I'm putting it in here, because it's safer than keeping it hidden in a jar in the yard, or doing like great granny did and keeping it under the mattress at night. I knit in a coffee cans somewhere where she thinks great granddad won't find it. It's going to be secure in there. I don't think that most people understand this concept that Lynette is talking about that when you put your money in that bank, legally speaking, you have loaned it to them. And about 340, she goes on to explain that in 1995, legislation was enacted called Regulation D, which allows the banks to sweep your deposits into sub accounts in the bank's name, and then they can use that as collateral for loans. This goes back to the whole concept of banks not making money, because some grandma went down there and put$100 in or kid just opened their first savings account and it has$10. In that we we know that the bank is not making money off of Granny's $100 or little Timmies first $10 that he just put in a savings account. But I think we tend to imagine if somebody has 50 or 100 grand in the bank like okay, this somehow the the bank magically makes a profit off that well, no, not really. But when you think about it in these terms, that they can take all of these deposits, put them into sub accounts in the name of the bank, and then use them to put out loans that they're going to garner interest from changes the picture, doesn't it? So when you see this term, unsecured creditor, it sounds kind of weird, kind of funky, like well, what does that even mean? I'm not an unsecured creditor, I have a checking account and a savings account. I'm just a normal Jane Q Public kind of gal and the hell's an unsecured creditor? Well, it's you by that definition, because they can take this money, put it into the sub accounts and use it for investments, use it for loans. Guess what, you become an unsecured creditor. And as Lynette points out, because all of this is happening in a way that's invisible to you, you don't even know that it's going on. Lynette also talks about how in 1999, the separation between these risk taking investment banks, versus a depositing bank got swept away. And as she puts it in a chilling sort of way for me because of the meaning behind it. She says Now, Wall Street really has full access to your deposits. So that's great. You know, okay, so, you know, the banks can't show up to the government hat and hand supposedly, and ask for a bailout. But screw it, they're not going to need to do that because Wall Street has full access to your deposits. What could possibly go wrong? I mean, I am sure that those bankers and those Wall Street fat cats, I'm sure that they would just always do what's in the best interest of the little guy. Another important point that they cover in this video is perception management. can also call it spin doctoring, if we wanted to, at about 1124. A clip is played from the FDIC systemic resolution advisory committee, or the S R A C, trying to say all of that three times fast, the FDIC, SR AC, which met in November of 2022. The quote that I provided in the write up for this podcast episode comes from that we want them to have full faith and confidence in the banking system. There's a select crowd of people that are on the institutional side. And if they want to understand this, they're going to find a way to understand it. It goes on to talk about high priced lawyers. So they're going to get the best lawyers and the best accountants and they're going to understand how all of this works. But like the general public, they shouldn't we should be really careful about how much this information gets out to them. I mean, they might panic and they're not even going to understand what's happening. Oh, like, if you want to know what the fat cats and the elites and the power brokers really think about the unwashed masses I feel like that gives you a pretty good idea. Throughout this video, there are so many great and important points that are brought up. I could be here all day if I just wanted to go through this one video and analyze every nugget of gold, no pun intended, that we learn. Yeah, hours and hours and hours and hours of analysis could go into a single episode. For the purposes of this episode. Are you ready? I mean, do you feel ready for whatever could be coming down the pike? As I said at the beginning, and I say in every episode, I don't tell you what to do. I don't give advice. I feel like in my opinion, I sleep better at night, if I have a little extra food, a little extra water. And I have some sense of what's going on. I do think we're living in weird times, chaotic times. I think there's some pretty clear precedents that the power brokers and the fat cats and the politicians will take care of themselves. If they feel that danger is on the horizon, they'll do what they need to do to protect themselves. They're not worried about the unwashed masses and the peons and the plebs. In my opinion, they're just not there. And the onus is really on you. Not only to caveat emptor, let the buyer beware. But let the buyer stay aware. Pay attention to what's going on. Some of the conflicting, bizarre information that they expect people to swallow hook line and sinker is beyond me, for example, a 3.4% unemployment rate, but yet mass layoffs. And in fact, it's to the point where I couldn't even keep a running ticker going for you in real time. When I'm recording the Saturday broadcasts. After I get done recording a segment there will be more layoff announcements. I mean, it's just like a constant churn and burn of layoff announcements. And no, it is not just Silicon Valley. And no, it is not just big tech. It's not just huge companies either. The thing is we hear about large companies, whereas the mom and pop shop down the street from you that may have 12 employees and has to let three of them go, that's not going to make the nightly news. It's not going to be on a LinkedIn announcement. But yet, we know these things are happening. But you're expected to believe Nevertheless, a 3.4% unemployment rate is still somehow a workers market. If you get laid off from 150k big tech job, well, it's alright. You can go make burritos, or you can go make sandwiches for 15 bucks an hour and you'll be fine. I feel like a similar narrative could very well shape up around this question of bail ins. And if you go and you watch this video if you don't watch anything else in it, if you just dip in long enough to watch that FDIC meeting and the smugness and ego involved there. Well, yeah, I mean, bank runs could totally happen, but we don't want them to happen. So the general public needs to stay ignorant. You. But I know like I feel it energetically I feel it. There will be people who listen to this episode and think, Well, they would just know over. Yeah, sure. There's a whole lot of things in my years on this planet that are just Nevers. I mean, when I was a kid, the whole idea of the internet was unfathomable. The same thing with having a tiny smartphone that you keep with you all all the time, that's a telephone and a calculator and has all these apps on it. And you can send texts, and you can send emails, I would never have fathom such a thing when I was a kid, but here we are. So the idea of letter just couldn't possibly be some sort of systemic bank failure. They just couldn't possibly do bail ins. Are you sure about that? I guess to me, what it boils down to is how confident are you in the system? How confident are you in these mainstream media narratives? Do you feel like there's some magical Hail Mary pass coming and it's all going to be okay. Just curl up with your binky and your bottle and go back to sleep. Because that's really what they want you to do. I mean, even the comment they're about and you'll you'll see this if you watch that FDIC vid do like these people get their news from tweets. And I've said before, I only joined Twitter, because of the link between Twitter and substack. And I really like the media assets that substack gives you as an author to be able to help create something visual for your work. And that does help on social media because sometimes people will see an infographic and they'll start reading that and it will help them to get to the actual article. But when I go to the Twitter homepage, and just look around, oh my god, what a vapid wasteland of just junk and a lot of partisan politics. Orange Man bad Orange Man, great old man we currently have is fixing the problems old man we currently have as a moron, and it's just like, oh my god, none of this matters. None of it matters. Let me tell you, in my opinion, something that does matter. If a bank can come and take your shit, life's gonna get real, real real fast. If that happens, if they say oh, excuse me Mom is your excuse a mom and was ill I need your money. We need to get bailed in. Now, you'll get shares of the bank after the fact after this little dust up, settles down, we'll give you some shares in the bank. Now that may not be what you want. It may not be what you need, it may not do a damn bit of good for you. But that's how we'll handle it and we need your money that will impact your life. I hope that you're paying attention. As I've said many times, I know that I sound like a broken record I do. I really feel like whatever this is, is going to separate out people who paid attention from people who didn't, as well as people who are capable of using good rational critical thinking skills from people who just aren't. Are there people nowadays that are flat out zombified? They seem to exist in some weird almost catatonic state. Like something from Idiocracy. Yeah, hell yeah, there are. That does not have to be you. I highly recommend this Kitco video. Check it out, form your own conclusions about it. Maybe you watch it and you think something totally different than I do. Maybe it doesn't terrify you the way that it terrifies me. Maybe it spurs you to some kind of action about your personal finances. Maybe it doesn't. I don't know. But I do think you owe it to yourself to at least watch the video and formulate your own opinion. There's so much good information in there. Stay safe, stay sane. And I will see you in the next episode. Thanks for tuning in. If you enjoyed this episode, please take a quick second to subscribe to this podcast and share it with your friends. We'll see you next time.