Are Funds Deposited In Your Bank Account Really Yours?

By Patrick A. Heller
Commentary on Precious Metals Prepared for …..

The implications of the twists and turns in the Cyprus bailout fiasco are reverberating worldwide.  One of the lessons that Americans should learn from this is that funds you deposit in your bank are only yours so long as the bank or the government does not take them.

Until now, bank shareholders were the first to suffer should a bank become insolvent through mismanagement.  If owners’ shareholdings were insufficient to cover liabilities, then the bank’s bondholders would lose their investment.  Only after those sources were depleted would it be possible for the deposits made by the bank’s customers to be taken.  When the Federal Deposit Insurance Corporation was established, it only protected the bank’s customers with deposit accounts such as checking and savings.  FDIC did not cover bonds or shares of the bank.

cyprus_coins_2With the Cyprus bailout, this hierarchy of security for accounts held by bank customers has been turned upside down.  For that nation and its banks to receive a bailout, many bank customers are having funds seized directly from savings and checking accounts.  The Cypriot government may be calling this a tax, but it is basically an outright confiscation of people’s assets.

While some Cypriot bank account holders lost part of their funds, the banks’ shareholders and bondholders escaped relatively unscathed.

This change in principle of how to pay for government and bank bailouts establishes a precedent.  The governments of Spain and New Zealand are already considering similar bank account confiscation programs, though on a smaller scale than Cyprus.  Effectively, what happened in Cyprus now puts the bank account balances owned by anyone anywhere in the world at risk!

If it’s any consolation to Americans, they were already at risk of having their bank steal funds from their accounts, even before the recent developments in Cyprus.  On August 7, 2012, the US 7th Circuit Court of Appeals announced its ruling in a case where the Sentinel Management Group had stolen $500 million of customer secured funds.  These funds were used as part of the collateral for a loan from the Bank of New York Mellon.  The proceeds of the loan were used to purchase millions of dollars’ worth of high-risk, illiquid securities that benefitted the officers of Sentinel.

In the Court’s decision, the Bank of New York Mellon was placed in line to receive funds before the account holders at the Sentinel Management Group.  This decision opens the door for banks to steal and co-mingle customer accounts without any legal liability to make good should the bank absorb losses.

Americans can no longer automatically assume that their bank accounts really belong to them.   If the banks don’t steal them, then there is a risk that the US government might.  If neither of these events come to pass, then you still have to consider how you will get by should there be a national bank holiday lasting for at least 10 days, where no one would be able to touch any funds in any bank accounts.  What will you do to prepare yourself?

Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award.  He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects.  Past newsletter issues can be viewed at  Other commentaries are available at Numismaster (under “News & Articles) .  His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at

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  1. 1. FDIC guarantees accounts up to $100,000
    2. In Cyprus, only amounts over the ECB-insured amounts are being levied a tax
    3. Cyprus is not the USA, in an infinite number of ways
    4. You give no actual reasons why Americans “can no longer automatically assume that their bank accounts really belong to them”

    • Trent Imbruglia, you clearly have no knowledge of what you write:

      1. FDIC ‘guarantees’ accounts up to $250,000 not $100,000. But the FDIC fund that ‘guarantees’ these accounts is tiny relative to the total size of US deposit accounts. If a TBTF bank were to fail, or a slew of smaller banks were to fail in a short period of time, the FDIC ‘guarantee’ fund would quite possibly be busted rather quickly. Then what? Remember AIG?

      2. The european oligarchs did try to ‘tax’ (steal) the insured funds at first. ‘ECB-insured’ accounts were spared only because the Germans would not allow it this time. But next time may be different.

      3. True, Cyprus is not the US. In the US, the citizenry is armed and willing to defend their property from outright theft by the oligarchs. In the EU, not so much.

      4. Mr Heller clearly gave his reasons. Did you even read the article?

      • Yes, should have been $250k.

        Mr Heller gains from scaring unhinged self-appointed rebels-in-waiting like yourself. He gave no actual reasons why Americans should be afraid of this.

  2. Trent,
    Well stated, and I would add that U.S. banks are the largest, most well-capitalized in the world, and we have a Fed and political system that have shown they will do whatever it takes to back up our banking system. In fact, you could argue that since our banks are, as some have said, not just too big to fail, but too big to jail, the banks may be more powerful than the government in many ways.

  3. Trent

    1. FDIC actually insures up to $250,000, but not for all types of accounts:

    2. Confiscation, whether insured or not, or called a tax or whatever, is still confiscation

    3. What’s your point? Think it cannot happen here?

    4. Mr. Heller used the “actual” example of Sentinel Management Group. I can think of others – MF Global comes to mind, as well as the Gold confiscation of 1933. So Cyprus gives “bank bonds” to its victims just like Roosevelt gave Federal Reserve “Notes” here.

  4. I enjoy reading the comments that Mr. Heller’s pieces inevitably attract. Honestly, the events in Cyprus spooked me out, too, but I’d take a deep breath and calm down before buying any asset motivated by fear.

    • Yah, UNLESS your marketing strategy is ALL ABOUT stoking fear. And it’s not just Heller; its Nachbar and Stuppler and quite a few others who will proliferate like flies at Chicago in August. They try to call themselves “Numismatic Investment Advisors”, as if such a thing exists.


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