Thursday Reads: Banks Reopen in Cyprus; An End to “Too Big to Fail” Banks (?); Vagina-Phobia; and Much More

Banks reopen in Cyprus and media jostle to get the best view - posted by Joe Parkinson (@JoeWSJ)

Banks reopen in Cyprus and media jostle to get the best view – posted by Joe Parkinson (@JoeWSJ)

Good Morning!!

The banks have opened in Cyprus with controls on how much depositors can withdraw.

Joe Weisenthal posted updates at his Business Insider blog:

At 6:00 AM ET, banks in Cyprus reopened their doors for the first time since March 16.

Wall Street Journal’s Joe Parkinson reports that only eight people are being allowed in at a time at one Bank of Cyprus branch.

However, the crowds have been orderly.

Everyone is wondering whether there will be a huge run on the banks.

So far? Not yet.

This is likely due to a set of capital controls that have been imposed on the banks.  Specifically, Cypriot depositors cannot withdraw more than 300 euros per day from any one bank.  Also, checks cannot be cashed.

These controls will be in place for seven days.

See more Twitter updates and photos at the link. International Business Times has some details about the capital controls that are supposed to prevent bank runs. In addition to the withdrawal limit, depositors can’t cash checks unless they come from another country.

In the meantime, non-cash payments or money transfers are banned unless they are related to a number of conditions.

These conditions include commercial transactions, payroll, living expenses and tuition fees.

If commercials transactions are less than €5,000, there are no restrictions, but payments above this amount and up to €200,000 will be subject to a 24-hour decision making process, in order to determine whether the liquidity of the bank would be able to incur such a withdrawal.

Transfers for paying employees will also still be allowed but relevant documents would have to be presented in order to prove the money is being used to pay staff.

Transactions on credit or debit cards are also capped at €5,000 euros per month.

According to the Wall Street Journal, some large depositors seemingly had advance knowledge of what was going to happen in Cyprus and moved their money out of the country weeks before the crisis.

The chairman of the Committee for Institutions in the Cypriot Parliament, Deputy Dimitris Syllouris, said he had submitted a letter to the Central Bank of Cyprus demanding an investigation into account holders who moved large sums of cash out of the country in the weeks ahead of Cyprus’s chaotic bailout talks…

He said he had received information about individuals and businesses moving money out of Cyprus weeks ahead of the bailout deal—a move that wouldn’t be illegal but could imply that some depositors had warning that negotiations for a bailout could, for the first time in the financial crisis that has rattled the euro zone, take a cut out of regular bank deposits.

Asked whether his suspicions focused on one specific group of depositors, he said “politicians, all sorts of people, and bankers themselves are no better.”

That figures…

Outflows from Cyprus were increasing from moderate levels from January until March 15, the officials said. Last week—especially after March 19, when the Cypriot Parliament rejected the first bailout deal that would have imposed a one-time levy on large deposits—the outflows under the central bank’s exemptions went up significantly, they said.

Several hundred million euros, but less than a billion euros, left the country despite the bank closures, according to one official.

At Bloomberg, Clive Crook says Cyprus’ Plan B is Still a Disaster.

The new deal has removed the craziest part of the agreement reached March 16 — the plan to default on deposit insurance. Let’s not dwell any further on that insanity. But the new plan still has features that, seen in any other context, would surely arouse surprise.

For instance, the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund wanted to be sure that the new debt Cyprus is about to take on will be sustainable — meaning, presumably, that Cyprus will be able to repay it. Yet, by writing down high- value deposits, the revised plan will also cause a sudden contraction of the Cypriot banking system, and thus of the whole Cypriot economy, which depends on banking to an unusual degree.

He concludes that,

Bailout fatigue says: “The Cypriots got themselves into this mess, and they should get themselves out. We’ll lend them a bit more, but only if we’re sure they’ll pay us back.” Cyprus didn’t get itself into this mess. It joined the euro system in 2008 with low public debt and a clean bill of health from EU governments (back then, not a word was said about shady Russians). Its banks are in trouble not because they accepted too many overseas deposits but because they bought too many Greek bonds — an investment sanctified by international banking rules (which called such investments riskless) that was destroyed by the EU’s ham-fisted resolution of Greece’s threatened default.

Europe’s sense of “we’re all in this together” seems to have evaporated entirely. Now one has to ask not merely what the euro is for, but what the EU itself is for.

Back in the U.S.A.,

too-big-to-fail

Simon Johnson has an interesting post at the NYT’ “Explaining the Science of Everyday Life” blog: The Debate on Bank Size Is Over.

While bank lobbyists and some commentators are suddenly taken with the idea that an active debate is under way about whether to limit bank size in the United States, they are wrong. The debate is over; the decision to cap the size of the largest banks has been made. All that remains is to work out the details.

To grasp the new reality, think about the Cyprus debacle this month, the Senate budget resolution last week and Ben Bernanke’s revelation that — on too big to fail — “I agree with Elizabeth Warren 100 percent that it’s a real problem.”

Policy is rarely changed by ideas alone and, in isolation, even stunning events can sometimes have surprisingly little effect. What really moves the needle in terms of consensus among policy makers and the broader public opinion is when events combine with a new understanding of how the world works. Thanks to Senator Sherrod Brown, Democrat of Ohio; Senator Warren, Democrat of Massachusetts, and many other people who have worked hard over the last four years, we are ready to understand what finally defeated the argument that bank size does not matter: Cyprus.

I can’t briefly summarize the gist of Johnson’s piece, so if you’re following this story, please read the whole thing. Could he really be right about limits on “to big to fail or prosecute banks.” I sure hope so!

In other news,

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Thursday Reads: Is It Finally Time for Some Hope and Change?

U.S. President Obama reads "Where the Wild Things Are" alongside first family during White House Easter Egg Roll in Washington

Good Morning!!!

Rachel Maddow is such an optimist. After I listened to her show last night, I began to have real hope for change (pun intended) on the gun control front. Rachel talked about President Obama’s announcements yesterday, and how the knee jerk reaction of the DC pundits was basically, “ho hum, it’s nice talk but there’s no chance for real change.” But the American people agree with Obama on gun safety. If he gets out there and fights for his initiatives, he could accomplish a lot.

Another encouraging note–I can’t recall if it was on Rachel or another MSNBC show–Richard Wolffe said that he saw a look in Obama’s eyes that he’s seen before. Wolfe said it was like Obama’s determination on health care, a sign that he really cares of this and will follow through. I think Joe Biden deserves a lot of credit for this too–as he did in pushing Obama to come out in favor of gay marriage last year.

As we saw with the gay marriage issue, when the President focuses on something it becomes big news. Yesterday there was lots of discussion and it was the main topic on Morning Joe this morning too. Interestingly, after a lot of excited pro-gun-safety talk, Scarborough brought on Jim DeMint to talk about the Heritage Foundation reaction, and DeMint punted. He talked in circles and refused to offer any ideas! The right wingers simply weren’t prepared for this fight. They thought the fear of the NRA would carry the day as always.

Anyway, I feel hopeful for now. Maybe Obama can continue to change the political conversation in his second term. To me the most powerful decision the president made was to enable federal support for research on the causes of gun violence. From Inside Higher Ed:

Obama issued an order to the Department of Health and Human Services to have the CDC as well as the National Institutes of Health study issues related to gun violence, and asked Congress to appropriate $10 million for additional work in the area. Obama said in his public remarks that research is part of the solution to gun violence, and he sharply criticized the past limits on studies.

“While year after year, those who oppose even modest gun safety measures have threatened to defund scientific or medical research into the causes of gun violence, I will direct the Centers for Disease Control to go ahead and study the best ways to reduce it — and Congress should fund research into the effects that violent video games have on young minds,” Obama said in introducing his new policies. “We don’t benefit from ignorance. We don’t benefit from not knowing the science of this epidemic of violence.”

He followed that up immediately with a memo to Kathleen Sebelius, secretary of the Department of Health and Human Services, telling her to work with the CDC “and other scientific agencies within the Department of Health and Human Services [to] conduct or sponsor research into the causes of gun violence and the ways to prevent it. The Secretary shall begin by identifying the most pressing research questions with the greatest potential public health impact, and by assessing existing public health interventions being implemented across the nation to prevent gun violence.”

The president’s actions are consistent with several requests from violence scholars in the last month, as Vice President Biden led an administration task force to develop the plan released Wednesday. Dozens of scholars of violence this month — organized by the Crime Lab of the University of Chicago — issued a joint letter to draw attention to the impact of federal policies that have effectively banned federal support for their

This is how the anti-science Republicans think: Avoid facts and data, stifle knowledge, close your eyes and ears and scream if anyone tries to break through the denial. But the American people are with Obama on this. Some people are saying that Congress will never appropriate the money for this research. I’m not so sure. If the Republicans continue their pro-gun and anti-people tantrums, they may find themselves in the minority in both houses of Congress in 2014.

Here’s the NYT writeup of Obama’s announcement on gun safety: Obama to ‘Put Everything I’ve Got’ Into Gun Control.

Surrounded by children who wrote him letters seeking curbs on guns, Mr. Obama committed himself to a high-profile and politically volatile campaign behind proposals assembled by Vice President Joseph R. Biden Jr. that will test the administration’s strength heading into the next four years. The first big push of Mr. Obama’s second term, then, will come on an issue that was not even on his to-do list on Election Day when voters renewed his lease on the presidency.

“I will put everything I’ve got into this,” Mr. Obama said, “and so will Joe.” [....]

“I tell you, the only way we can change is if the American people demand it,” Mr. Obama said. “And, by the way, that doesn’t just mean from certain parts of the country. We’re going to need voices in those areas, in those Congressional districts where the tradition of gun ownership is strong, to speak up and to say this is important. It can’t just be the usual suspects.”

Meanwhile on the life-dying, death-affirming, ideological side of this fight, the NRA really hurt itself yesterday by going after President Obama’s daughters in an attack ad. From the National Journal: Has the NRA Finally Gone Too Far?

The National Rifle Association has been skirting the lines of decency for years, but the gun-rights group stoops to a new low with a Web ad calling President Obama an “elitist hypocrite.” The ad criticizes Obama for giving his daughters Secret Service protection while expressing skepticism about installing armed guards in schools.

The ad is indisputably misleading, and is arguably a dangerous appeal to the base instincts of gun-rights activists….

The fact is, Obama is not opposed to armed guards in schools. Indeed, many of the nation’s schools already hire security. This is what Obama is skeptical of: the NRA’s position that putting more guns in schools is the only way to prevent mass shootings.

The president wants to ban assault rifles, require background checks, and ban high-capacity ammunition. He does not want to confiscate guns, despite the NRA’s unsubstantiated warnings to the contrary.
There are fair arguments to be had over Obama’s proposals: Redefining the Second Amendment shouldn’t be done without a vigorous debate. But to drag the president’s daughters into the fight, and to question their need for security, suggests that the NRA is slipping further away from the mainstream. Over-the-top tactics discredit the NRA and its cause.

Well it sure looks like we’re going to have that “vigorous debate” now.
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