A lot of people still don't have a real grasp of this...imho.

U can't "steal" from deposits. The deposits aren't there anymore! The levy is really just how U apply the lipstick to the pig...

...Imagine a bank with 10 billion in deposits. Using antique lending rules, the bank buys 100 billion in AAA rated "junk" mortgage backed securities with borrowed money and 10 billion in "principal". (10 times the deposits)...The bonds were bought on the Spanish housing boom which then proceeds to lose 25%. The bank has just lost 25 billion whatevers with only 10 billion in cash deposits!

The bank carries the bonds on its books at full value for a while but...the mortgage bonds now drop another 10%...the bank is now down by 35%, (35 billion), and now the original 100 billion lender wants some loan payback...hmmm

The bank has spent/lost 10 billion in deposits, and is down another 25 billion on top of that and now needs to come up with perhaps a 5% payment.!! Where is that bank going to get 5 billion whatevers??!

The original deposits are GONE! The bank needs to rationalize the loses at some point (the lipstick)...to make its books look better to secure even more loans!..to make the original loan repayments.

Rather than telling the depositors it has lost 100% of their money, it says only 10% of it initially to see how that flies...NOT SO WELL!!!

I repeat, the deposits are 100% gone already...just like the gold in Ft Knox.

Hope that helps.

gildage