Well, after over a week of trying to figure out how much money to take of of the bank accounts of private citizens in Cyprus, a deal has finally been reached. Depositors with over $100,000 are seeing their accounts frozen as Cyprus plans to use a percentage of their funds to help pay for a bailout. Glenn reacted to the news on radio this morning.
Reuters explained the latest on the Cyprus bailout:
Backed by euro zone finance ministers, the bailout plan will spare the Mediterranean island a financial catastrophe by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits under 100,000 euros to the Bank of Cyprus to create a "good bank", leaving problems behind in, effectively, a "bad bank".
Deposits above 100,000 euros in both banks, which are not guaranteed by the state under EU law, will be frozen and used to resolve Laiki's debts and recapitalize the Bank of Cyprus, the island's biggest, through a deposit/equity conversion.
Many analysts fear that Cyprus was not a unique case and that depositors with uninsured bank accounts in other indebted countries could see a "haircut" applied to in future bailouts.
Bill Gross, who runs the Pacific Investment Management Co. in ,California, tweeted “Cyprus haircuts prove just 1 thing: without growth, highly indebted EU countries will eventually suffer a similar fate.”
"Here's what's kills me - nobody sees the gulf that they are making. Anybody under $100,000 they're leaving alone. Well I got news for you, In the grand scheme of things, those who have $25,000 in the bank, at the end of their life they have $25,000 in the bank, those are the ones that need the government at the end of their life. They're going to need the government because they didn't save or whatever. So they have that much money in the bank. And then there's this giant gulf between them and they're destroying all the wealth between those guys and everybody else up to like the Soroses and Bloombergs."
"You are re-creating Europe. Overnight we are re-creating it. We are making serfs and lords. That's it. There's nobody on the road in between," Glenn said
Glenn encouraged listeners to find small, local banks that won't be engaged in the practices that led to the "haircut" penalty in Cyprus.