Tax savers to bail out banks? I don't think so
Cypress is a tiny island in the Mediterranean Sea.
Only about a million people live there, which is seven million fewer than call New York City home.
But Cypress has made big headlines this week because of what the European Union sought to do to its citizens.
In exchange for a 10 billion euro bailout of the island's insolvent banking industry, the EU wanted to tax the residents' savings -- 6.75% on deposits of less than 100,000 euros and 9.9% on deposits more than 100,000 euros.
By almost any measure, it was an outrageous plan.
Why the country's leaders negotiated such a scheme with European and international creditors is beyond me.
Some financial experts are calling it the worst decision the EU has made during the financial crisis that is roiling the continents banks and weaker governments.
The rationale that most of the big depositors are actually Russian doesn't matter. It was still stupid to levy fees on regular citizens who did nothing wrong.
If you want to start a bank run, this is how to do it.
Fearing that the island's parliament might approve the deal, Cypriots rushed to withdraw as much of their money as possible, emptying every ATM in sight.
Although lawmakers responded to the outcry and voted down the deal, the islands banks have been closed all week to avoid a huge outflow of deposits.
No one knows what Cypress will do now.
But can you imagine how we would have reacted if regulators had tried such a tax here?
What if the Bush administration had levied a fee on all Citibank deposits to fund its bailout during the 2008 financial crisis?
A lot of mistakes were made dealing with the too-big-to-fail banks after their reckless lending nearly destroyed our financial industry.
But at least Washington didn't make this mistake.
At least we're not Cyprus.
That's something to be grateful for, I suppose.