FX MONETARY POLICY
ABC News, “Thursday’s result is a compromise that differs from the original banking union idea put forward in 2012. The original proposals had a third pillar, Europe-wide deposit insurance. But that idea has stalled.”
E u r op e an Central Bank P r e s i d e n t Mario Draghi, speaking before the March 20th meeting in the Belgian capital, hailed the c om pr om i s e plan
progress for
as “great a
better banking union. Two pillars are now in place” – two but not the third. And two are not enough to protect the public. As observed in The Economist in June 2013, without Europe-wide deposit insurance, the banking union is a failure:
“[T]he third pillar, sadly ignored, [is] a joint deposit-guarantee scheme in which the costs of making insured depositors whole are shared among euro-zone members. Annual contributions from banks should cover depositors in normal years,
24 FX TRADER MAGAZINE April - June 2014 President Mario Draghi hailed the
compromise plan as “great progress for a better banking union”
backing... [T]he banking union— and thus the euro—will make little sense without it.”
All deposits could be at risk in a meltdown. But how likely is that? Pretty likely, it seems . . .
What the Eurocrats Don’t Want You to Know
Mario Draghi was vice president of Goldman Sachs Europe before
but they cannot credibly protect the system in meltdown (America’s prefunded scheme would cover a mere 1.35% of insured deposits). Any deposit-insurance scheme must have recourse to government
he became president of the ECB. He had a major hand in shaping the banking union. And according to Wolf Richter, writing in October 2013, the goal
of Draghi and
other Eurocrats is to lock taxpayer and depositor liability in place before the panic button is
hit over
the extreme v u lne r ab il it y of Eurozone banks:
“ E ur op e a n banks,
like all
banks, have long been h e rm e t ica ll y sealed black boxes. . . . The only thing known about the holes in the balance sheets of these black
boxes, left behind by assets that have quietly decomposed, is that they’re deep. But no one knows how deep. And no one is allowed to know – not until Eurocrats decide who is going to pay for bailing out these banks.”
When the ECB becomes the regulator of the 130 largest ECB banks, says Richter, it intends to subject them to more realistic evaluations than the earlier
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