Your bank deposits, who's money is it?

Andy C

Well-Known Member
An interesting read,

https://thehutchreport.com/your-bank-account-who-really-owns-the-money-hint-its-not-you/

Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.


In general, unsecured creditors, such as depositors of a bank, will have very little redress to cover their debts if a company is put into liquidation. The courts will not deal with the question of which class of creditor should have priority over other classes in such circumstances.


In the case of banking, it indicates the limited responsiblity of a bank towards depositors once the bank has the money put into its account. The principle illustrates that the relationship between the depositor and the bank is not one of principal and agent, where the bank as an agent acts on behalf of the principal and their interests. The money deposited in an account is no longer deemed as belonging to the principal but rather to the bank.


The money paid into the banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself. (Banking Regulation of UK and US Financial Markets – By Dr Dalvinder Singh)
I admit, Im a little ignorant on this subject.

Can you site an example where a depositor had all their money seized, and not in a case of when a bank failed?

I only deposit in a bank thats insured through FDIC.

I have never had an issue, nor has anyone I know of.
 

Ohioan

Well-Known Member
I admit, Im a little ignorant on this subject.

Can you site an example where a depositor had all their money seized, and not in a case of when a bank failed?

I only deposit in a bank thats insured through FDIC.

I have never had an issue, nor has anyone I know of.
I cannot site an example, I can only say that the Dodd Frank bill regarding bankruptsy of a bank now can use your funds that are deposited in a bank as collateral to pay off debt and remain solvent

I did not like reading this bill myself but as soon as your money is deposited in a bank you become an unsecured creditor and if the bank goes under, the FDIC using your funds bails the bank out and is now known as a bail in, instead of a bail out which taxpayers assume the liability of a bank going under.
You in essence, have to stand in line for your funds if a bank goes under.

This is how the bill reads

U.S. regime15The framework provided by the Dodd-FrankAct in the U.S. greatly enhances the ability of regulators to address the problems of large, complex financial institutions in any future crisis. Title I of the Dodd-Frank Act requires each G-SIFI to periodically submitto the FDIC and the Federal Reservea resolution plan that must address the company’s plans for its rapid and orderly resolution under the U.S. Bankruptcy Code. The FDIC and the Federal Reserve are required to review the plans to determine jointly whether a company’s plan is credible. If a plan is found to be deficient and adequate revisions are not made, the FDIC and the Federal Reserve may jointly impose more stringent capital, leverage,or liquidity requirements, or restrictions on growth, activities,or operations of the company, including its subsidiaries. Ultimately, the company could be ordered to divest assets or operations to

10December 2012 4facilitate an orderly resolution under bankruptcy in the event of failure. Once submitted and accepted, the SIFIs’plans for resolution under bankruptcy will support the FDIC’s planning for the exercise of its resolution powers by providing the FDIC with an understanding of each SIFI’sstructure, complexity,and processes.16Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.3Title II requiresthat the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders,and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced. Once appointed receiver for a failed financial company, the FDIC would be required to carry out a resolution of the company in a manner that mitigates risk to financial stability and minimizes moral hazard.4Any costs borne by the U.S. authorities in resolving the institutionnot paid from proceeds of the resolution willberecovered fromthe industry
 

Almost Heaven

Well-Known Member
I cannot site an example, I can only say that the Dodd Frank bill regarding bankruptsy of a bank now can use your funds that are deposited in a bank as collateral to pay off debt and remain solvent

I did not like reading this bill myself but as soon as your money is deposited in a bank you become an unsecured creditor and if the bank goes under, the FDIC using your funds bails the bank out and is now known as a bail in, instead of a bail out which taxpayers assume the liability of a bank going under.
You in essence, have to stand in line for your funds if a bank goes under.

This is how the bill reads

U.S. regime15The framework provided by the Dodd-FrankAct in the U.S. greatly enhances the ability of regulators to address the problems of large, complex financial institutions in any future crisis. Title I of the Dodd-Frank Act requires each G-SIFI to periodically submitto the FDIC and the Federal Reservea resolution plan that must address the company’s plans for its rapid and orderly resolution under the U.S. Bankruptcy Code. The FDIC and the Federal Reserve are required to review the plans to determine jointly whether a company’s plan is credible. If a plan is found to be deficient and adequate revisions are not made, the FDIC and the Federal Reserve may jointly impose more stringent capital, leverage,or liquidity requirements, or restrictions on growth, activities,or operations of the company, including its subsidiaries. Ultimately, the company could be ordered to divest assets or operations to

10December 2012 4facilitate an orderly resolution under bankruptcy in the event of failure. Once submitted and accepted, the SIFIs’plans for resolution under bankruptcy will support the FDIC’s planning for the exercise of its resolution powers by providing the FDIC with an understanding of each SIFI’sstructure, complexity,and processes.16Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.3Title II requiresthat the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders,and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced. Once appointed receiver for a failed financial company, the FDIC would be required to carry out a resolution of the company in a manner that mitigates risk to financial stability and minimizes moral hazard.4Any costs borne by the U.S. authorities in resolving the institutionnot paid from proceeds of the resolution willberecovered fromthe industry
This says depositors will not be held responsible or suffer losses. That falls to the shareholders and common stock holders not ordinary depositors.
 
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