Brokerage Accounts "Cyprus'ed" ?

[achilles28]

Quote from Ghost of Cutten:

If they are deposits then they are not commandeered - you already lent them. Commandeering is when someone takes your funds by force - not when you voluntarily hand them over and then can't get them back because your debtor is insolvent.

Bad debts being turned into equity is what happens in bankruptcy situations all the time. The equity holders get wiped out, and the creditors get their fair share of the carcass of the insolvent entity. Nothing new here, run along.

There is something very new here. The implicit Government backstop has been removed, and bail-ins written in as the new normal. That's new as of 20 years ago, since the whole era of moral hazard started with the S&L crisis. Ya, you're right about depositors being unsecured creditors to the bank, who technically own our deposits once lent to them. Dismissing this is as a "nothing to see event", is really a huge mistake..