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Posted Tue Mar 19 2013: from
NPR:
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Where The Bank Really Keeps Your Money http://apocadocs.com/s.pl?1363665959
Cyprus has about as many residents as the Bronx. All Cypriot banks combined are smaller than the 30th-largest U.S. bank. So why is the country's financial system front-page news today?
The answer, in large part, comes down to two words: Deposit insurance. Deposit insurance is one of those boring-sounding finance terms that's central to the way the world works today. Everybody is freaking out over Cyprus because the country just called into question the sanctity of deposit insurance.
Deposit insurance was invented because of a frightening fact: Even the most boring, safe, neighborhood bank is in a crazy, risky business. A bank takes money people put in checking and savings accounts -- money those people are allowed to withdraw at any time -- and lends it out to people who don't have to pay it back for 30 years....
In Cyprus, deposit insurance covers accounts up to 100,000 euros. At least, it was supposed to. But this weekend, the country broke the fundamental promise of deposit insurance.....
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