Can the government seize personal bank accounts or retirement savings to fund essential debt? That's just a crazy idea, isn't it?

This is Donald Harvey Marks, a physician scientist and 3rd generation veteran. Welcome to the Existential blogpost and Podcast. I cover in a non-technical manner contemporary issues such as access to healthcare, medical and vaccine adverse events, elitism, the great people I have known or known of in my life, and short reviews of recent fiction and nonfiction that I have read. Most of my writings are present on my personal blogsite DHMarks.blogspot.com and on my Youtube channel @DHM49. Your comments are always welcome.

Recently, I listened to a financial podcast that discussed our frighteningly large national debt, the possibility of a default and its consequences, including the far-fetched idea that the government could seize personal bank accounts or retirement funds to fund essential debt. I’ve delved into the topic some have suggested of whether the U.S. government can actually access or seize personal checking accounts, savings accounts, and 401(k) retirement funds during a national financial emergency, such as an impending default. Following is my overview, as a non-economist, based on current laws, expert analyses, and discussions in podcasts that I have listened to and articles I have read. I have tried to provide citations for the interested.

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Checking and Savings Accounts:

General Rule: Under normal circumstances, as far as I can tell as a non-economist, the government cannot arbitrarily seize funds from your personal bank accounts. In general bringing up this topic or even raising this possibility is in my opinion more a scare tactic designed to feed click bate than a real possibility, but there are some nuances, as followers.

Exceptions:

Tax Debts: The IRS can levy bank accounts to collect unpaid federal taxes.

Court Judgments: Funds can be garnished to satisfy court judgments, such as unpaid child support or alimony. 

401(k) Retirement Funds: Funds in employer-sponsored 401(k) plans are protected from creditors under the Employee Retirement Income Security Act (ERISA). 

More Exceptions (of course there are):

IRS Levies: The IRS can access 401(k) funds to collect unpaid taxes.

Qualified Domestic Relations Orders (QDROs): In cases of divorce or child support, a QDRO can mandate the distribution of funds to an ex-spouse or child.

Criminal Penalties: Courts can order the seizure of funds to satisfy criminal penalties. One more reason, among the many, to always be honest and good.

It's important to note that once funds are withdrawn from a 401(k), they lose ERISA protection and can be subject to creditor claims.  

In the Event of a National Financial Emergency or Default

Legal Authority: There is no existing legal framework as far as I can determine that allows the federal government to unilaterally seize personal bank accounts or 401(k) funds to address a national financial emergency or default. Any attempt to do so would likely face significant legal challenges and require new legislation. Thank God for that. 

Historical Precedents:

During the 2008 financial crisis, the government implemented measures like the Troubled Asset Relief Program (TARP) to stabilize the economy but did not seize individual accounts. But, in my opinion as a non-economist, desperate diseases by desperate measures are cured, or not at all. Now, where have you heard that before?

Discussions around government involvement in retirement accounts have occurred, such as proposals to modify the 401(k) system, but these have not resulted in the government taking control of individual retirement funds. I do not see that ever happening. The societal stability would be severely interrupted. 

Podcasts and Discussions on the Topic

While there are not a lot of podcasts directly addressing the government's highly unlikely ability to seize personal financial accounts during a default, several episodes I have listed to provide context on related issues:

“The 2008 Financial Crisis Explained" – Civics 101 podcast: This episode delves into the causes of the 2008 crisis and the government's response, providing insight into how financial emergencies are managed. Context is given into what our country could be approaching.

"Basics on Sovereign Debt and Default" – St. Louis Fed Podcast: Economist Paulina Restrepo-Echavarria discusses why governments borrow, what happens during a default, and recovery processes. Its a very dry and formal discussion and if you are not an economist, maybe not for you.

"What's the Deal with the Debt Ceiling?" – Stuff You Should Know podcast: This episode explores the debt ceiling's role in government funding and the implications of not raising it. Definitely worth listening to.

Key Takeaways, from my standpoint 

Under current laws, the government cannot seize personal checking accounts, savings accounts, or 401(k) funds to address a national financial emergency or default without due process and legal authority. Chatter to the contrary is fear-mongering and click-bate. Disregard.

While certain exceptions exist (e.g., IRS levies, court orders), these are specific and not broadly applicable to all individuals. Historical responses to financial crises have focused on systemic solutions rather than targeting individual accounts. Our government will eventually focus on reducing expenditures, balancing the budget and other essential moves, but most likely  only once it is forced to and has exhausted all other delay tactics.