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Banking Bail In (aka: We’ll take your deposits in the next crisis) – Questions for Our Senators

Here’s a set of questions for which I’d like to get 100 Senate answers, and then publish all the responses. I have sent it to my two senators, Feinstein and Boxer.

The Wall Street Journal reports:

In fact, US banks presented the Federal Reserve with a bail-in plan to pay for large banks ‘restructuring in the event of a future crisis.

If this be the case, then there are some questions:

  1. Are deposits under the FDIC insured limit at risk?
  2. Are deposits over the FDIC insured limit at risk?
  3. If the banks desire to use their depositors’ monies in case of need, are bailed-in deposits to be treated like shares, loans or bonds, or insurance?
  4. Are depositors whose funds are liable to be confiscated (by a bank or consortium of banks) to become shareholders, with shareholders’ rights and privileges, including payment of dividends? Will they be provided a prospectus and very frequent updates on trading positions, for these potential shareholders to assess risks? If depositors are to accept increased risk, the banks must provide enough information for depositors to make a reasonable business decision.
  5. If depositors are not to become shareholders in case of financial confiscation, are depositors (whose funds at risk,) to become bond holders, with bond holders’ rights and privileges, including payment of interest and rights superior to shareholders? Will they be provided a prospectus and very frequent updates on trading positions, for these potential bond holders to assess risks?
  6. Assuming the answer to 4 and 5 above is “No,” are depositors whose funds are at risk to become insurers? If so what timely information is to be provided for these insurers to assess and underwrite these risks?
  7. Are depositors’ whose funds are now “bailed in” for the Bank’s losses, now to be “bailed into” the Bank’s bonus and profit programs?
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