Richard Postma - The Doctor Is In – Thu 1 Aug, 2019

There are several errors in that article by Jeff Thomas. First, when you deposit money in a bank, you are loaning your money to the bank. There is a debtor-creditor relationship. When you deposit your money in a bank, the ownership of your money really does not change. It is the control of your money that changes. Thomas says “if you deposit money in the bank, it becomes the property of the bank”. Sure, your deposits becomes the property of the bank in the sense that it is in their possession which means that they have control of it but that is not the same as actually owning it outright. The same is true when the bank loans you money. That money does not belong to you. It is the banks money which you are legally required to pay back. People mistakenly believe that if your money is listed on the bank’s balance sheet as an asset then your money is no longer your money but legally belongs to the bank. I disagree with them. If that was the case then why can depositors file a claim as a creditor to get their money back when a bank becomes insolvent. After all, if the depositor’s money no longer belongs to them then they should have no right to try to take money that legally belongs to the bank. The same is true if I close out my checking account. If that money does not belong to me then why is the bank required to give me money that is owned by the bank? If I loan my brother $10,000 and he puts it in his safe, is that still my money or is it now his money? It is still my money even though it is in his possession. Now if he were to die my money would be listed as an asset of his estate. I, of course, would have to file a claim against his estate to get my money back which I am legally entitled to do.

Thomas is also wrong about Greece freezing all bank accounts. No bank accounts were frozen. What they had was certain restrictions (capital controls) on the money that was in bank accounts. Depositors could still make online electronic transfers inside Greece just as before however depositors were limited to the amount of physical cash that they could withdrawal to just €60 per day, per account holder, and per bank.

Thomas also wrongly states that “a law was passed in 2010 that allowed any bank, if it declared a bank emergency, to confiscate deposits”. That is false. Banks have no authority to confiscated deposits (bail-in). It is the banking regulators like the FDIC that have the authority to do bail-ins but only for financial institutions deemed to be systemically important which would exclude most banks.

cfs, when it comes to credit unions, I see very little difference between banks and credit unions as a whole. The larger credit unions have derivatives. Also while credit unions do make local mortgage loans they also have a good amount of auto loans and unsecured loans, some of which are sub-prime. They also have the same regulations as the banks including Regulation D which allows banks and credit unions the right to require at least seven days written notice if you wish to withdrawal money from certain types of accounts like money market accounts or savings accounts. In fact some credit unions even say that they have the right to require up to 60 days notice for certain accounts as seen in the example below:

“We reserve the right to require you to give not less than seven (7) and up to sixty (60) days written notice of your intention to withdraw funds from any account except checking accounts.”

https://www.usccreditunion.org/wp-content/uploads/disclosures.pdf

And back in the 2008-2009 financial crisis the four largest corporate credit unions failed. These corporate credit unions are sometimes referred to as “the credit union’s credit union” since they provide liquidity, investment and payments services to credit unions. Also back then the National Credit Union Share Insurance Fund (NCUSIF) went broke.