When I first heard the story about the Cypriot bank bailout on the radio this weekend, I thought the reporters must've gotten it backwards. But no, in an alleged attempt to forestall a bank run, Cyprus has agreed to tax bank deposits:

In the early hours of Saturday morning, after 10 hours of talks, finance ministers from euro area countries, the International Monetary Fund and the European Central Bank agreed on terms that include a one-time tax of 9.9 percent on Cypriot bank deposits of more than 100,000 euros, and a tax of 6.75 percent on smaller deposits, European Union officials said.

Jesus. That's just plain stupid. Forget about the blunt immorality of taxing bank depositors in order to bail out bankers, this deal sends a signal to depositors in struggling economies throughout the European Union to quickly pull their money out of the bank before they too lose a big chunk of their life savings:

Moody’s Investors Service warned that the decision to impose losses on depositors was “a significant departure from past instances of support” by European officials. It “signals euro area policymakers’ willingness to risk triggering wider financial market disruptions in pursuit of other policy goals,” Moody’s said in a note.

Analysts at DBS in Singapore wrote that financial markets were worried that the plan to force ordinary depositors to share the cost of the bailout “may send the wrong message on the safety of bank deposits in other E.U. nations, just when light appeared to be emerging at the end of the long tunnel for the peripheral nations.”

This policy is pretty much the exact opposite of what one might do if one wanted to avoid a bank run. I mean, maintaining faith in the banking system is the whole purpose of our FDIC, which insures bank deposits up to $250,000 per account. But if European officials are going to confiscate a portion of the accounts of small depositors in Cyprus, why shouldn't depositors in Greece, Italy, Spain, Portugal, Ireland and elsewhere fear the same?

I'm beginning to think that the IMF and the ECB are just fucking with people now.