A tale of two bankruptcies: Washington Mutual versus Laiki Bank

According to Alan Blinder, a former vice chair of the Federal reserve and professor of Economics at Princeton and a Keynesian when Washington Mutual one of the largest banks in the U.S. with assets of $328 billion  went bankrupt in 2008 and was sold to J.P.Morgan Chase by the Federal Reserve and the Federal Deposit Insurance agency in 2008 none of its deposit0rs including those with assets in excess of  $250,000 U.S. lost money. In Cyprus on the other hand according to the latest reports the impending bankruptcy of the Laiki bank with assets below 40 billion will apparently involve losses of as much as 30% for depositors above the deposit insurance level of €100,000. Those with accounts below 100,000 will have them transferred to the Bank of Cyprus. The deposits of those above 100,000 will be kept in the bankrupt bank and suffer accordingly.It is an interesting contrast between Europe and America and the quality of their respective central banking systems to compare the outcomes. How long the second bank will last will depend upon the banking panic that may follow these events. The repercussions will be felt far and wide.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, Cyprus banks, European financial stability fund, Greek sovereign debt crisis, Uncategorized and tagged , , . Bookmark the permalink.

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