Seeing the debacle of the proposed
'bank depositor's' tax in Cyprus makes me wonder how the
Powers-That-Be in the EU thought it was such a good idea. While it
would have raised a bunch of one-time revenue, it would have ruined
what was left of the Cypriot banks when depositors withdrew all of
their cash after the one-time charge in order to prevent the
government from taking even more of their money. Considering
depositors had already paid taxes on that money it was stupid to
think they would stand for such shenanigans. Call it yet another
example of the Law of Unintended Consequences.
If that were tried here in the US I
would expect as much outrage, if not more, as well as runs on bank
deposits that would cause hundreds, if not thousands of banks to
fail. If you need an example of what such a bank run looks like in
the 21st Century, all one has to do is look what happened
at the Indy Mac Bank after Senator Chuck Schumer (D-NY) made the
suggestion that it might be in trouble. In a matter of a couple of
days depositors withdrew over $3 billion in cash, causing the bank to
fail. But loudmouth Chuck was wrong. The bank didn't have any issues
that might have caused problems until Chuck Schumer's injudicious
words triggered the run on the bank. In other words it was Chuck who
caused an otherwise healthy bank to fail.
In the US those of us who actually save
our money are already penalized by taxes upon any interest earned on
our savings. Again, this is money on which we have already paid
taxes. The tax laws penalize savings which in turn has caused the
amount of savings to plummet. Should some idiot like Chuck Schumer
decide slapping a 10% tax on bank deposits would be a great way to
raise revenue, we would see an economic collapse to rival that of the
Great Depression. Banks would fail and there's no way the FDIC could
possibly meet its obligations. Why would anyone put money in a bank
knowing the government could seize some portion of it in order to pay
its bills? It would be safer burying it out in the back yard.