Poll: Bank Run

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Dmag, I believe only about 300 US banks might go under over the next several years. Keep in mind there are over 8000 financial firms in the US. During the S&L crisis, about 1,000 firms went under. Altough IndyMac might cost us 7 billion back in the 90's Continental Illinois itself was a $140 billion dollar mess.

Yes, everyone will take their money out of the bank. Good ideal. Invest in Sleepy's, Serta, Simmons and Sealy.

lol ootin, that was hilarious. i can almost see some half-azzed talking head analyst spew that kind of garbage out on cnbc.

I've wired anything over $100k out of WaMu and Etrade Bank.

What is everyone doing with their money? Seriously. Our life savings are at Citi tied up in a lot of investments that would not be easy to get out of at this point.

Your deposits are insured up to $100k now if you have your money in the common stock of a bank like a Citi, Wamu, Nat City then you should be worried. Once a stock is at single digits its possible it can go to zero in a matter of days. Just look at Indymac and Bear Sterns. Your investments should also be safe its the stock that you should be worried about. Don't worry about having to make ridiculous bank runs, pundits love to hear themselves talk and make outlandish claims.

10 cents a share is being proposed on CNBC. I'll be a buyer at that price.

Referring to FNM

spunky,

Wasn't that proposal made by a hedge fund manager that is shorting the stock? Maybe a slight conflict of interest.

NYRENewbie - it depends on your risk tolerance and on your view of likelihood of catastrophic scenarios. We had our entire net worth at Citi (wouldn't call it life savings, we are relatively early in life), and in March took some of it out and parceled out into under-$100K bits in different places to make sure they're all insured. Sounds ridiculous, and was annoying to do, but I'd rather sleep well at night.

On the one hand, logic tells me the chances of a run on Citi or a similar bank are incredibly small. On the other hand, no layman can begin to understand all the financials of big complex bank, and lately I get the sense the people running it don't have much more of a clue. There's plenty of examples of spectacular collapses that would've been unimaginable weeks/months before (Enron, LTCM, Winstar, lots more in the 80s that I am too young to remember well). Again, not saying anything like that is going to happen, but am sufficiently worried that it could, and wanted to protect myself and family.

newbuyer99, good move. i'm also in the "relatively early in life phase" myself and have done the same earlier. parceled cash that's not invested into 100k chunks and distributed it.

used to have the majority in citi. moved some to hsbc- it has a great online savings app that lets you transfer and get everything done online in under 30 minutes, including the electronic transfer. just wait for the 3 days for the cash to clear. Chase and a few others were ok too.

many banks across the country have a program for persons with large savings to go to the bank and they will buy CD's from different banks to keep all of your funds FDIC insured. This way you do not have to run around and there is no risk.

FDIC has some strange rules. If you are a husband and wife you can have $400k in insured deposits in any one bank by naming each other as beneficiaries. And an extra 200k for each kid if you and your spouse name him/her as a beneficiary. Talk to your bank manager and he would be happy to print you a FDIC insurance form with the qualifying amounts. Solves the 100K dilemma. And no tax consequences.

I can't tell you how grateful we are for your suggestions. A few weeks ago we called our "personal banker" at Citi and he kind of scoffed at our concern. But we will definitely look into your suggestions. I agree that it is highly unlikely, but these are some "strange days indeed, mama".

What if your funds exceed an amount practical for doling out to a bunch of banks at $100K apiece?

What about low-risk money market accounts (treasuries, munis, etc.) at institutions such as Schwab, Vanguard, Fidelity, T Rowe, etc? What do you perceive the risks to be with these institutions?

Im more worried about the ramifications of a big name failing, like WaMu or Wachovia..Indymac is cake walk compared to what will occur to tradable markets if one of the big guys goes under, and the media starts their thang causing widespread panic and a deep crisis of confidence.

Think about what equity markets will do if a WaMu fails. The securitization market, which is all but dead, will be completely laid to rest. Gold will soar. Dollar will crap out. Foreigners may lose faith in our treasuries and yields could surge (maybe a 2009 concern). Getting a loan will get even more difficult, so how will that help housing?

Its a domino effect if big names start failing.

You can guess in regards to how well the institution will fare, however, we have seen how rapidly a firm can unravel. Best bet may be to go with a firm that automatically distributes your money markets to 30 different banks so that you have FDIC insurance on $3 million per account name. The next question is whether or not the money markets will break the buck (a different risk from what FDIC Insurance protects you from which is the institution going under). In the event of a lack of liquidity in the money markets, you would want to be invested in Treasuries, and so long as your account is not a margin account, your assets are segregated from the firm's balance sheet, and you are protected. (keep in mind it is not o.k. to just have a margin account and not be using the margin, the account type must be a cash account.)

Here's a video from the FDIC itself that may help some people here:

http://www.vodium.com/MP/MPF/1.1.3/mpf.asp?xml=/vs_data/pn100318_fdic_di_2006/84B8FM1Q/mediapod.xml&type=mediapodflash

I would not keep my money in a smaller bank right now like say Emigrant. I know nothing specific about them but I am staying with the big international banks, ING and HSBC. and under 100K in each.