The days of a bank run being typified by long lines and Jimmy Stewart begging for calm are over. As what happened at Wachovia the run on the bank is now a few clicks away.
Online banking has changed how we interact with our banks. I have not walked into a branch once the ATM’s started giving me photocopies of the checks that I deposit.
So when Wachovia started springing leaks and ended up designated “the next bank to fail” by the media and the intelligentsia, smart customers lined up and started moving money out to get below the $100,000 FDIC insurance limit. Money started hemorrhaging out as customers got scared, and now Wachovia is Citigroup.
One more interesting point to all of this is how good the FDIC and Federal Reserve have gotten at shutting down a bank. The move to outsiders was so smooth and effortless that is barely raised a ripple on the surface of the media.
Inside Wachovia, executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday. “The so-called silent run on the bank – it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview. “When Congress failed to pass the ($700 billion bailout) proposal, when WaMu collapsed, you could see the money flowing. My computer screen was lighting up.”
Starting Friday morning, Evans said, businesses and institutions with large accounts started withdrawing money to lower their balances to below the federally insured $100,000 limit. They weren’t closing accounts, he said, adding “they were very apologetic in saying they love the service they get from Wachovia and they weren’t leaving Wachovia. They were just moving their money until things settled down.” via Charlotte Observer
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{ 4 comments… read them below or add one }
I noticed something interesting in the dynamic of the media. When a situation rose for the first time, it takes all the attention. It's legitimate for the media to focus on it; it's their job to inform us on what is happening! But when the situation happens a second time, it has less impact and so on.
However, for this situation, it can be important to remind us that at the same time the transaction between the 2 banks was happening, everyone was focusing on the future of the bailout. So the media priorities were maybe somewhere else… Thanks!
http://www.ratebuilding.com
This does not surprise me. Our big banks are in trouble and there is more bad news comping. Whether the bailout passes or not is besides the point. Our banking institutions are in trouble. Everyone should start looking for ways to protect their money. This basically comes down to either taking your money out of the market and cutting discretionary spending or diversifying and investing some overseas. I personally use offshore bank accounts and they have helped me with diversification and asset protection. If you want to read more on why offshore investing is smarter, feel free to visit my website.
Best,
Frank Miller
http://www.theoffshorebankaccount.com
is this the Tom Royce the beautiful golden haired musician i knew from the haight ashbury?…..now a real estate blogger? how cool is that.. if it is..well be nice to hear from you my brother ..after all these years still playing and singing gospel..Bobby Kent
Sorry Bobby, not that Tom Royce but it seems like he led a charmed life.
I was tall with dark hair, now tall with less hair out of New York with a voice only an angel could love. That is why I write.
Maybe that Tom Royce will see this and find you down the road. Godspeed.