It Can Happen Here: The Confiscation Scheme Planned For U.S. And U.K. Depositors

[Yo_Mama]

13. This article is wrong

First, insured deposits would remain insured, covered in the normal manner.
http://www.fdic.gov/about/srac/2012/gsifi.pdf

Then, for those deposits not insured, what would happen is that the complex institution would be shut down by taking assets of top-level managers, then from bondholders, then last from uninsured depositors.

Also note that this paper was written to discuss the resolution of a multi-national banking/financial firm, and/or an SEC-regulated financial firm (non-bank with no deposit insurance).

There is nothing in this paper nor in the US plans to do away with deposit insurance. Your deposits in an FDIC-insured bank are covered up to $250,000:
http://www.fdic.gov/deposit/deposits/changes.html

Now deposits in a financial firm that is NOT an FDIC-insured bank aren't insured.

"Unsecured debt" really refers to bondholders, not depositors.

Even in the UK, there is no intent to get rid of deposit insurance:

The U.K. has also given consideration to the recapitalization process in a scenario in which a GSIFI’s liabilities
do not include much debt issuance at the holding company or parent bank level but instead comprise insured retail deposits held in the operating subsidiaries . Under such a scenario, deposit guarantee schemes may be required to contribute to the recapitalization of the firm , as they may do under the Banking Act in the use of other resolution tools. The proposed RRD also permits such an approach because it allows deposit guarantee scheme funds to be used to support the use of resolution tools, including bail-in, provided that the amount contributed does not exceed what the deposit guarantee scheme would have as a claimant in liquidation if it had made a payout to the insured depositors. That is consistent with the contribution requirement that is already imposed on the Financial Services Compensation Scheme in the U.K. in the exercise of resolution powers 10 and simulates the losses that would have been incurred by those deposit guarantee schemes during bank insolvency. But insofar as a bail - in provides for continuity in operations and preserves value , losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation. Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.

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