Secrets of the Cyprus heist

Secrets of the Cyprus heist

macromarketmusings

By Franklin Raff

I have served as a flag-man among the pirates of offshore banking. I know Cyprus well and have sailed into Larnaca in the dead of night, in small boats, on business. But in this story, the good guys and bad guys are not who you think they are.

Let me show you why the plunder of Cyprus is probably one of the most brilliant acts of wholesale theft the world has ever known, why the stolen treasure may be thousands of times greater than has been suggested, and why the names of the victims, and the full value of the loot, will remain a mystery forever.

In the days of wooden ships and iron men, colonial empires pillaged entire populations. At sea, independent traders, merchantmen, privateers and pirates (broadly, those who operated without paying tribute to to one crown or another) were masters at avoiding the powerful warships of unfriendly nations. Of great importance in this effort was knowing which flag to fly, when, in order to avoid capture.

Things are not so different today. Powerful governments seize and confiscate assets, sometimes justly or “legally,” sometimes not. At sea, still, owners select men like me to analyze a host of variables and carefully select the flags and attendant legal and financial structures that will best protect their vessels and other assets. The stakes are high. The company is good. It is nice to know John Galt.

In order to understand what has happened in Cyprus, you must first conjure, in your mind, images representing a truly colossal amount of money.

Briefcases full of cash? Think shipping containers. Bafflingly intricate networks of corporate and private wealth, shell companies, holding companies and staggering transfers between these entities and others. Think private planes and mega-yachts, too – the works – and multiply this kaleidoscope by thousands of beneficial owners, major shareholders and top executives all over the world.

Now you have a glimpse of the dynamic, multilayered, nebulous network – almost completely opaque by design – whose few points of convergence included Cyprus.

As in a sea battle, exposure is dangerous. When envisioning riches, Hollywood might draw our imaginations to Swiss vaults, mahogany corridors and bars of gold, but much of that stuff – the places, the mechanisms, the glitter – is old news. As for the toys, practically speaking, they are merely exposed, and therefore dangerous, assets. But seizing boats is a time-consuming, complicated business for government raiders, unless they lead to greater treasure. (The boats are almost always left to rot, which is why, when appropriate, they are “rescued.”) From a business perspective, the attention-getting trappings of a producer’s affluence only matter if they draw the wrong kind of attention. What is critical is the money. The target wants to keep as much of it as he can, legally or otherwise. The empires want to take it, and they determine what is legal.

It is impossible for the media to convey, in pictures, the extent of the wealth harbored in Cyprus. Quiet, dusty Nicosia and Limassol aren’t remotely glamorous. Here, Greek efficiency meets British hospitality. Leyland cars putter along the Larnaca waterfront. Middle-class Holiday makers ponder the remains of the Empire over warm beer and kleftiko. Every once in a while, a tourist plunges to his death in a rented motorbike. Cyprus would make a dreary set for a movie about such an astonishing robbery. It was a place to avoid that kind of attention. This isn’t where the world’s elite spent their money; it’s where they kept it. Like a pirate’s cove, it was ideal for hiding treasure, and stealing it.

Though it may be easy to think of offshore depositors as foreign outlaws, pirates or simply “Russians,” this is not nearly the case. Cyprus was a leader – in some circles and for some applications, the leader – in quiet storage, management and structuring of exceptionally large sums for private individuals and corporations all over the world. Cypriots were fast learners in the fields of global asset protection and “tax optimization.” (I do cringe to say these words.) Cyprus’ 2004 entrance into the EU gave financial operations a deeper veneer of legitimacy and security. All of this meant almost a decade of rapidly expanding business. This was surely from Europeans and Russians wary of unpredictable tax laws and indiscriminate, extralegal confiscations, but also from entities in North America and elsewhere.

The score itself is bigger than we can imagine and will be impossible to determine. The breadth of the depositor base and very nature of the business, the holding of particularly large deposits, gives us an inkling as to the size of the heist, but so does the brazen nature of the action. What we know is that it is government theft of a kind not seen since wartime Germany or revolutionary Russia. Accounts have simply been seized; portions of their untold contents, as we like to say in America, “redistributed.” And though the event has provided distracting local human-interest fodder for the world media, personal savings and such things as the operating accounts of small businesses represent a negligible portion of the dollar amounts involved. Some of the largest businesses and the richest, most powerful people and trusts in the world had money in Cyprus. And that is why nobody is talking.

Expect major instability and enduring shock waves. The implications of the heist, ominously called “precedent setting” by its own architects, are staggering. Of course, many will lose their savings, businesses will fail and the move will draw even more blood from the flaccid economy we have been enjoying since the last great stick-up.  (I refer, of course, to the moment our politicians convinced us Wall Street needed $800,000,000,000.00 “by Tuesday.”) More important, depositors and investors worldwide will lose faith in their banks, in their governments and in the EU. The final result may please anarcho-capitalists and others who see this as irrefutable proof of the elemental wickedness of compound governments and central banking systems, but it will not be pretty. When power is over-extended and blatantly abused, people revolt, money moves off the books and producers turn to cleverer and more audacious means of piracy.

How much was stolen, after all? How many accounts were seized? Nobody likes to know a secret without getting all the details, but I don’t know all the details. Nobody does. That’s the point. All we know is that immeasurable sums have vanished, and the victims are quiet. It is a perfect crime.

You will never see a complete and verifiable list of beneficial account holders.

You will never see a complete and verifiable tally of the loot.

The best way to pull off a heist is to make it so nobody blows the whistle or calls the authorities. Better yet is to arrange things so the authorities are in on the job. Best of all, of course, is when the authorities do the job.

And that is exactly what has happened in Cyprus.

Read more at http://www.wnd.com/2013/03/secrets-of-the-cyprus-heist/#fTHVgSfpC2btM1Zz.99

The Cyprus model for Canada’s big banks

Lilley’s Pad

theeconomiccollapseblog.com

Brian Lilley 

I started asking on Monday, and again on Tuesday, whether the confiscation of money from private bank accounts could happen in Canada the way it has happened in Cyprus. My argument was that yes it could, especially given that Cyprus is a modern European nation and that the decision to dip into accounts was made by finance ministers and officials from countries such as Germany, France and Italy.

This was not a Robert Mugabe theft of cash. If it can happen there then it can happen here.

Little did I know that the answer was already in the budget on page 145 (155 of the PDF).

• The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that,in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

• Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans.

This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail.”

“Bail-in” is exactly how Eurozone officials described what happened in Cyprus (details here and here). In order for the country to get the bail-out from the EU, the banks needed to get a bail-in from their depositors. At first this meant every depositor and then just those with deposits over €100,000.
I asked officials from Finance Minister Jim Flaherty’s for comment on what this section means to them, here is the response from Flaherty’s Director of Communications Dan Miles.

“Bail-in arrangements are NOT ‘bail-out’ arrangements∙
Under a ‘bail-out’ arrangements, taxpayers money has to be used to save a failing financial institution∙
Under a ‘bail-in’ arrangements, a failing financial institution has to tap into their own special reserves or assets (which they have been forced to put aside) to keep their operations going∙
This keeps the financial institution in tract, without risking taxpayer money. This is what Canada is doing, in line with recent international agreements.”

No denial in there that depositors will be asked to pay up if Canadian banks fail. Some think that is a probability that will never happen but obviously the Finance Department thinks it could happen or it would not devise rules. The Big Six Banks were also recently told to up their capital requirements to prevent failure.

So unless Miles is not telling me something, the new regime in Canada is that deposits up to $100,000 will be insured through the Canada Deposit Insurance Corporation and anything else that you hold with a single bank will be up for grabs if that bank fails.

On one level it makes sense to say those who invested in the bank should be the ones who bail it out and not taxpayers. No one wants taxpayers to fund the bail out of big banks.

But is this what most people expect from their bank?

And what exactly would be up for grabs? Would a bank account with $150,00 in life savings see a good part of it seized? What about an RRSP I’ve built up through my bank for retirement? Having more than $100,000 in an RRSP is not out of order for a good saver or a self-employed person who needs to look after their retirement needs on their own.

And what about business accounts at that point, accounts that need to meet payroll?

As Jonathon Chevreau from Moneysense told me on Tuesday, diversify, diversify, diversify.

Canada has a new regime for possible bank failure and it looks exactly like Cyprus. One of our major banks failing may be unlikely but that doesn’t mean it is impossible.

Is Canada the next Cyprus?

Judi McLeod

It’s Good Friday and a government holiday in Ottawa.

No point trying to reach Canadian Finance Minister Jim Flaherty today.  So rather than wait until Monday, Canada Free Press (CFP) is posing this cliff-hanger question:

“Is that a Cyprus-style “Bail In” proposed in the newly-minted 2013 budget?”

That’s what economic gunslingers on both sides of the border and dozens of letters to the editor are charging.

What began as a rumble is growing into an ear-splitting cacophony—and the Canadian government should post a truthful, detailed and in-plain-English explanation on its website.

If Canada is going the same direction as Cyprus and the European Union, we need to know as soon as possible.

The concept of a Canada taking money from unknowing bank depositors is not just within the realm of hysteria and hype.

Not when Page 144 of the 2013 Canadian budget states: “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy.  This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.

Keep reading on  canadafreepress >>

The Greek debt that became Cyprus' Trojan Horse

Euronews

Now is Cyprus - Bailout may equal half its economy

www.msnbc.msn.com/

NICOSIA — Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said on Tuesday.

The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said on Monday it was formally applying for help from the European Union's rescue funds.

Cyprus is the euro zone's third smallest economy but it joins Greece, Ireland, Portugal and Spain in seeking EU rescue funds to try and stay afloat, and is the latest sign that policymakers have failed to stop the debt crisis spreading.

European leaders will meet at a summit on Thursday and Friday but they are not expected to come up with a lasting solution to the region's problems that have also sent Italy's borrowing costs soaring.

Exact amount undecided Two euro zone officials said that a package of up to 10 billion euros was being considered for the 17.3 billion euro Cyrpriot economy.

"The exact number has not been decided yet. It was to be 6 billion for the state financing and 2 billion for the banks but that is optimistic — it is more likely to be seven and three — up to 10 billion euros in total," one euro zone official said.

A second official confirmed the amount was likely to be up to 10 billion euros, a massive bill for Cyprus.