At this afternoon’s FOMC Press Conference in response to a question posed as to whether the Fed would ever impose depositor haircuts as was attempted this week in Cyprus, Fed Chairman Ben Bernanke confirmed that Cyprus style depositor haircut wealth confiscation is possible here in the US if the Cyprus event or another event in Europe were to become contagious and the people lose confidence in the US dollar.
At 3:18 PM EST Bernanke was whether a seizure of deposits could happen to US depositors as in Cyprus, if the economy gets worse?
Beranke’s translated response: Only if the Cyprus event or another event in Europe were to become contagious and the people lose confidence in the US dollar.
Bernanke stated that depositor haircuts in the US are extremely unlikely, as FDIC provides deposit insurance for customer deposits?
(editor note: and so did Cyprus!)
While QE to infinity will be pursued as long as possible and Bernanke downplayed the possibility depositor haircuts would ever occur in the US, the entire Cyprus fiasco ever occurring in the US is according to Bernanke only extremely unlikely because the FDIC has a history of making good on failed banking institutions.