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Cyprus bailout scheme fraught with moral hazard

3/18/2013

6 Comments

 
Picture
First, a reality check. There is zero chance the Cypriot bank tax would happen in the United States.

At least, we’re far from that point. For one thing, sequestration is leading us in the right direction.

The larger question is whether what Cyprus decides to do (the subject is scheduled for debate in the Cypriot parliament Tuesday) will have a ripple effect here and, more likely, in Europe.

It would be hard to imagine a worse way to handle an economic crisis than to tax bank accounts. Cyprus got into this problem because its two largest banks made irresponsible loans to the Greek government equal to 160 percent of the GDP in Cyprus.

You shouldn’t even loan Greece a buck for a cup of coffee.


As part of an agreement to bail out those banks to the tune of $13 billion, the European Union is requiring Cyprus to raise money from its bank customers. The deal could be framed this way: Either let the government confiscate some of your hard-earned savings or lose your bank and all of your savings and watch your nation fall into a severe recession to boot. Oh, and you’ll likely lose your job in that recession as unemployment skyrockets.

You could hardly design a more disastrous bailout. It is a textbook recipe for creating moral hazard.

One would think the EU could find an easier way to help its smallest member, an island nation of about 1 million people.

It should go without saying that a key to any stable economy is confidence in its banking structure. President Frankly D. Roosevelt spent much of his first two terms trying to urge Americans to pull their money out of their mattresses and stick it back in a bank. People, understandably, had lost faith in banks after so many of them collapsed at the start of the Depression, but that loss of faith was crippling the economy.

One of the remedies was to create the Federal Deposit Insurance Corporation, which now guarantees deposits up to $250,000.

If Cyprus succeeds in taxing bank deposits (one early proposal was to charge 6.7 percent on accounts worth less than 100,000 euros, and 9.9 percent on those that are larger), other Europeans would be justified in thinking their accounts are not as secure as they once believed, either.

Already, ATMs in Cyprus are empty, according to news reports. Banks are on a holiday much of this week to avoid a full-scale run.

And because perception can be more powerful than any facts, figures or public assurances, banks in Spain, Italy and perhaps other European countries may be in danger of runs, as well.

I doubt U.S. depositors will make a run here. However, Rush Limbaugh has tried to draw connections between Cyprus and the way the Obama administration operates things, insinuating in this transcript that it could happen here. That kind of talk could be a self-fulfilling prophecy.

This blog by Scheherazade Rehman of George Washington University, on the other hand, is a good analysis of what’s going on, and the hazards at play. Cyprus has been a haven for Russian depositors, much of it part of an alleged money-laundering scheme.

The EU, and particularly Germany, doesn’t like this, which is why it not only wants to tax depositors, it wants to require an international anti-money laundering audit. This also is why Russian President Vladimir Putin is among the most vocal opponents of the plan.

But of course, confiscating money from even the smallest bank depositors would likely severely harm Cypriot banks, cause panic in other parts of the EU and shake confidence in other parts of the world, as well.

That’s a heck of a price to pay to get at some corruption.

6 Comments
Henry Vander Veur II
4/2/2013 03:10:00 pm

Why A Medical Prices So High????

x
Henry Vander Veur II <happyz49@gmail.com>

8:57 PM (1 minute ago)



MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Hell Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HELL IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !!

If I Pay $600.00 To Have My Furnace Fixed and 3 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them You Want A New Bill Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Needs A 4th Operation!!!

--
Please Pass Along!!

Reply
Henry Vander Veur II link
4/2/2013 03:20:28 pm

Jay Evenson PLEASE!!

Dear Sir.

Why A Medical Prices So High????


Henry Vander Veur II <happyz49@gmail.com>


Henry Vander Veur II <happyz49@gmail.com>


MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Heck?? Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HECK IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !! We Couldn't Walk For Months After Each Try!!

If We Pay $600.00 To Have Our Furnace Fixed and 5 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them, You Want A New Bill, Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Still Gives Me Alot Of Pain And Needs A 5th Operation!!!


Please Pass Along!! Please and THANKING YOU For Your Time and HELP !!!! Henry

Reply
Henry Vander Veur II link
4/2/2013 03:20:38 pm

Jay Evenson PLEASE!!

Dear Sir.

Why A Medical Prices So High????


Henry Vander Veur II <happyz49@gmail.com>


Henry Vander Veur II <happyz49@gmail.com>


MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Heck?? Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HECK IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !! We Couldn't Walk For Months After Each Try!!

If We Pay $600.00 To Have Our Furnace Fixed and 5 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them, You Want A New Bill, Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Still Gives Me Alot Of Pain And Needs A 5th Operation!!!


Please Pass Along!! Please and THANKING YOU For Your Time and HELP !!!! Henry

Reply
Henry Vander Veur II
4/2/2013 03:20:53 pm

Jay Evenson PLEASE!!

Dear Sir.

Why A Medical Prices So High????


Henry Vander Veur II <happyz49@gmail.com>


Henry Vander Veur II <happyz49@gmail.com>


MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Heck?? Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HECK IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !! We Couldn't Walk For Months After Each Try!!

If We Pay $600.00 To Have Our Furnace Fixed and 5 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them, You Want A New Bill, Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Still Gives Me Alot Of Pain And Needs A 5th Operation!!!


Please Pass Along!! Please and THANKING YOU For Your Time and HELP !!!! Henry

Reply
Henry Vander Veur II
4/2/2013 03:21:35 pm

Jay Evenson PLEASE!!

Dear Sir.

Why A Medical Prices So High????


Henry Vander Veur II <happyz49@gmail.com>


Henry Vander Veur II <happyz49@gmail.com>


MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Heck?? Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HECK IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !! We Couldn't Walk For Months After Each Try!!

If We Pay $600.00 To Have Our Furnace Fixed and 5 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them, You Want A New Bill, Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Still Gives Me Alot Of Pain And Needs A 5th Operation!!!


Please Pass Along!! Please and THANKING YOU For Your Time and HELP !!!! Henry

Reply
Henry Vander Veur II
4/2/2013 03:21:49 pm

Jay Evenson PLEASE!!

Dear Sir.

Why A Medical Prices So High????


Henry Vander Veur II <happyz49@gmail.com>


Henry Vander Veur II <happyz49@gmail.com>


MEDICAL PRICES ARE ONE OF THE MOST COSTLY TO AMERICANS????

WHY???


Why In The Heck?? Do We Have To Pay A Doctor and Hospital Over And Over For The Same Operation??? It Is High-Time That If A Doctor Does An Operation and It Does Not Fix The Problem, A Second Operation May Have To Be Done? But To Do The Same Operation 3 and 4 Times Is Truly Becoming Ludicrous !! My Friend And I Have Both Had 4 Operations, On The Same Thing And My Insurance Companies Are Wondering "WHAT IN THE HECK IS GOING ON"?? $80,000.00 For The Same Horribly Pain-Full Surgeries!!! And Have Been Charged 4 Times Because It Was Not Done Right !! We Couldn't Walk For Months After Each Try!!

If We Pay $600.00 To Have Our Furnace Fixed and 5 Days Later It Does Not Work?? We All Demand That The Repairman Come Back And Fix It Right! , For NO CHARGE!!

No Wonder Our Health Costs Are Higher and Higher Each Year!!

Call Your Senators And Congressmen And Tell Them, You Want A New Bill, Stating That Any Hospital Or Doctors That Do The Same Surgery More Than Once Or Twice. They Must Have Good Reason For Doing The Second Operation And Will Do The Third, Fourth And Fifty For 100% NO CHARGE!!!

PS: I Just Got A New Bill For $25,000.00 Plus Charges For One Day In The Hospital.

Henry Vander Veur II Salt Lake City, Utah 801-969-9696

PPS: My Leg Still Gives Me Alot Of Pain And Needs A 5th Operation!!!


Please Pass Along!! Please and THANKING YOU For Your Time and HELP !!!! Henry

Reply

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    The author

    Jay Evensen is the Senior Editorial Columnist of the Deseret News. He has nearly 40 years experience as a reporter, editor and editorial writer in Oklahoma, New York City, Las Vegas and Salt Lake City. He also has been an adjunct journalism professor at Brigham Young and Weber State universities.

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