The Big Fear is "Bank Runs"... which could bring down numerous banks at one time...

[Blackhatjack]

The WaMu lesson is that many of the banks and Wall Street entities have so few reserves set aside that any kind of 'run on the bank' would take them down. As long as everyone remains calm, they can continue to function. But if people get truly worried and start withdrawing their $$ there is not going to be any place for them to hide.

[whistle]

1. Where will they run to...

[elleng]

5. They will first 'run' to their banks,

govt. will have to explain that the funds are covered by fdic up to 100,000.

If in too many institutions, govt may have to 'close' banks early, and then explain what's happening.

Again, depends on media to explain, so don't bet on it.

[1corona4u]

12. FDIC just got a bailout...

it's already been said that FDIC would crash if too many banks went out at once.

[godai]

2. Maybe Bush shouldn't have used the word 'panic'.

Unless he wanted to play the fear card, which, of course, he did.

[beachmom]

3. Banks are FDIC insured. Anyone doing that is not that bright.

Now the run on the money market mutual fund last week was real, since it was not FDIC insured (the SEC or Fed swooped in and guaranteed it to stop the run). But FDR took care of the banks in the '30s.

[Barack_America]

8. But if people lose confidence in the FDIC?

What then? Can the FDIC really insure every deposit in every bank?

[KewlKat]

9. Federal Deposit Insurance Corp (FDIC) might have to borrow money

Aug 27, 2008

(Reuters) - Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.

The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.

The borrowed money would be repaid once the assets of that failed bank are sold.

"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.

Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.

In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.


http://www.reuters.com/article/ousiv/idUSBNG28670420080...

[1corona4u]

15. And this one, from the 16th....

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

Note the WaMu...

[jberryhill]

16. Yeah? What make the FDIC so damned secure? /nt

[1corona4u]

17. Wrong....read the thread again....

[cliffordu]

4. I'm glad I got my $16.79 out of Wamu before it caved today....

:rofl:

[TexasObserver]

6. It is NOT runs on the banks that take them down.

The banks fail because they have loans fail. The Office of the Comptroller of the Currency has bank examiners that look over the books and loans of banks. They require banks to write off bad loans against the bank's capital.

When a bank's capital reaches zero, it is insolvent. That's when the FDIC closes the bank, seizes the accounts, and turns over the accounts to a new bank, operated by some existing bank organization.

[On the Road]

10. Some of the Editorials Have Been Saying That

Banks are often overvaluing mortgages on their balance sheets, and if they were valued fairly, those banks would be technically insolvent.

Those banks, however, continue in operation. I wonder if part of a solution might be to allow those banks to continue functioning after revaluing their assets.

[TexasObserver]

13. it's up to the bank examiners to properly value the loans

But there aren't enough bank examiners to cover every bank, at the same time.

[Blackhatjack]

19. Sorry, but a 'bank run' will take it down regardless because....

So many are leverage to the point that their cash reserves are less than 5%, many less than 2%, and there just is not enough liquid capital to carry on business if customers show up and demand their $$.

Bank examiners do play a primary role in verifying the value of all assets owned by the financial entity, but nothing takes the place of cash --and if these banks cannot borrow form one another and they run out of cash, it will get ugly really quick. ANd it will spread....

[soothsayer]

11. actually, it looks to me more like coordinated shorting is taking these banks down

It's deliberate. It's a consolidation of power. All these banks are being swallowed up by other banks, sometimes with the Fed's effing blessing and coordination and money!! So don't kid yourself. It's a classic pump and dump; pump up the stock and then dump your shares to make a killing, then short it and make a killing on the way down too. Rinse and repeat. Then short it out of existence and let your friend's bank buy what's left, which WILL be worth $$$$$ in the long run.

[Democrats_win]

7. Raygun's grand plan: keep the workers scared and they'll work for peanuts.

That's why they hated Clinton: because Americans won't slave during peace and prosperity.

[WinkyDink]

14. Well, if they hadn't lost those billions in Iraq..........................

[medicswife]

18. Yeah, and these aren't any Bailey Bros. Savings and Loan we're

talking about either. The only thing, honestly, that keeps me from withdrawing any $$$ is that one, our pay comes from the Department of Defense, and two I don't HAVE any! Sheeeeeeesh. Raising four kids on Army pay is a feat unto itself.