Jason Farrell

If you’ve ever wondered what bureaucrats do late at night, now we have an answer: They argue with each other in smoke-filled rooms, trying to figure out how to make bad ideas even worse.

Reuters reports that after seven hours of late-night talks, finance ministers from the EU’s 27 countries emerged with a blueprint to close or save banks in hot water. Beginning in 2018, the so-called “bail-in” regime will be able to force shareholders, bondholders and some depositors to cough up money to keep banks afloat. Insured deposits under 100,000 euros are exempt.

“For the first time, we agreed on a significant bail-in to shield taxpayers,” exhalted Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers. He expects it to “break the vicious circle of sovereigns and banks, and to induce banks to behave more responsibly.” The European parliament still has to approve of the deal, which could take until the end of the year.

Dijsselbloem considers the move a “step forward toward a banking union.” Such is the European mindset: When trouble strikes, centralization will save the day… eurozone crisis be damned.

Economists didn’t believe a banking union was unlikely this year, according to a Reuters survey.

Of course, the “bail-ins” could trigger bank runs, which might be used as another excuse for intervention. This is worth keeping an eye on. Whenever politicians discover a way to divert responsibility for bad policies, expect it to catch on quickly. Canada has a similar “bail-in” plan on the table. The U.S. is likely not far behind.

Jason Farrell

For The Daily Reckoning

P.S. We’ve been keeping readers of the Daily Reckoning email edition regularly updated with tips and strategies to protect and even grow their wealth in the face of government confiscation and economic uncertainty. Sign up for free, right here, to start receiving the Daily Reckoning email and get ahead of the curve.

Jason Farrell

Jason M. Farrell is a writer based in Washington D.C. and Baltimore, MD. Before joining Agora Financial in 2012 he was a research fellow at the Center for Competitive Politics, where his work was cited by the New York Post, Albany Times Union and the New York State Senate. He has been published at United Liberty, The Federalist, The Daily Caller and LewRockwell.com among many other blogs and news sites.

Recent Articles

Addison Wiggin
When Genius Fails Again, Part III

Addison Wiggin

Addison Wiggin gives even more reasons why genius will fail again in part III of his series on Jim Rickards and the collapse of the financial market house of cards...


How to Bag Easy Gains from the “Mass Affluent”

Greg Guenthner

But these mass affluent sorts have the loyalty of a hooker. They'll dump one high-end brand for another at the first whiff of a better deal. And a company's profits can go poof if it doesn't figure out in advance what the hell this bunch wants next season.


Beginning to Taste the Fountain of Youth

Stephen Petranek

It is well known that the longer you live, the more likely you are to develop heart disease, stroke, osteoporosis and Alzheimer’s, to list only a few. But research out of the Salk Institute may be the clearest, most direct leap in understanding aging in the history of medical research and opens extraordinary possibilities for slowing down or even halting the aging process in humans. Stephen Petranek has more…