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‘Cypriot government agencies should be held accountable for crisis’

Published time: March 30, 2013 16:18

People queue up outside a Bank of Cyprus branch in the Cypriot capital, Nicosia.(AFP Photo / Yiannis Kourtoglou)

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The Bank of Cyprus announced that major depositors will receive about 40 percent of their money shares, and the rest will be frozen. Finance blogger Karl Denninger says the problem is not the stolen money, but the government that enacted this policy.

Government regulatory organizations and people who work for them should be held accountable for approving financial institutions apparently doomed to failure, Denninger told RT.

RT: These shares that people could be offered, given the financial meltdown in the country, are they even worth anything now?

Karl Denninger: Probably not. The real problem is that European Union assured everybody and Cyprus that these banks were perfectly fine and there is nothing wrong. This is the same sort of thing that happened here in the United States. People seem to forget that a few years ago IndyMac bank was supposedly just fine. In point of fact, members of our regulatory agencies were involved with backdating deposits which made them look sounder than they really were, and when the bank failed those people that set deposit limits, just what happened here in Cyprus, got wiped out.

So the issue isn't whether or not the shareholders, the bondholders and ultimately the depositors should bear the risk when this kind of thing happens. It's that you have government agencies and people, who work for these government organs that made false statements about the solidity of these institutions, and if you lie to somebody and they lose money you should be held to account for it.

RT: Why would the government push forward with the levy, after the Parliament rejected it a week ago?

KD: There is a real problem here, because the parliament said no to this scheme at the risk of knowing that this could lead them to having leave the euro and to fulfill these obligations. And what European Union did, they went around the parliament passing the series of bills that were allegedly not to do that sort of thing and then use them as a backdoor way to cease these banks. We have seen this repeatedly since 2007 when this crisis first broke across the world. And it continues.

The reality is that these agencies and institutions will not tell the truth. And so if you are a depositor if you have money in banks in Spain or Italy or even in the United States, how do you know when there is a risk? The only answer is that you must assume that you can have your money stolen at any point in time.

RT: Cyprus is living off its financial sector as a major offshore hub. Isn't it biting the hand that's feeding it by hitting investors in their banks?

KD: Even worse than that. There were branches of the Cypriot banks that were open in London during the time that they were closed in Cyprus. So if you were Russian that have great deal of money in these banks, or you were some kind of other off-shore person, who had money in these banks and you had some cash, you get on the plane, go to London and then you take all your money out. While the small business person in Cyprus who has his money there and needs to make payroll has his stolen.

So the people who were supposedly doing their money laundering got all their money out, it's the common business person in Cyprus that took it on a chin. And the reality of this is that it is going to lead to massive layoffs. Now when the money is gone, what are you going to pay people with?

RT: Do you think this raid on deposits could become a template for future bailouts in the EU? How worried should people be?

KD: Very. In fact, the Canadian government just released a budget document and on the 143rd page of it there is an exact same template used in Cyprus. For everyone who thinks this is limited to a little island nation in the Mediterranean you got another thing coming. And again, it is not that the loss shouldn't be bore by these people in order, if that is in fact the case.

The problem is that you have government regulatory scheme both in Europe and in other nations where they are supposed to be monitoring these institutions and closing them before they get in trouble like this. They are deliberately not doing their job. And then when there is a problem all of a sudden these people have nothing to do with this lack of actions, unlike those who end up taking it on the chin.

Comments (4)

 

Dimitri Diamant 01.04.2013 13:46

Could Washington tell the people of Rhode Island that their US dollars are different, and they can't take any US dollars with them if they visit Massachusetts or Connecticut? This shows that the "European Union" is already irreparably torn to shreds.

Anonymous user 31.03.2013 20:09

All Greeks are dodgy. Buy silver like I do.

Anonymous user 31.03.2013 02:32

Bugger banks. buy silver

View all comments (4)
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