I went to the bank today, WM to cash a check. While I was in line, I saw 3 people at the tellers taking out thousands in cash. I asked the teller if they were having a run on the bank, she said it was really bad yesterday, it is dwindling a bit today, but still going strong. Is WM the next to go? I didn't take out my money because I keep most of my resources in my trading accounts, but I don't understand the need with FDIC insurance. Seeing the guy in front of me take out 3 grand was a little ridiculous. The worst case scenario, you have to wait a day or two while the FDIC takes over. Otherwise, it was a little shocking that in this day and age, people have lost their faith in the banking system in the US. Comments?
I doubt it takes only a day or two to get your money from FDIC, more like months, and there will probably be a period of time when the bank's assets will be frozen, and as far as I remember only 100,000 are FDIC insured, but I might be wrong on this.
I'm just going from my readings on Indymac. It was closed by the FDIC Friday, and Monday most depositors were allowed to withdraw. As far as the 100k limit, my point is, if you have less than 100k in a bank isn't it pointless to draw it out just to go along with the crowd. But all this said, maybe WM is the next to go.
It is pretty common to get the first 100k within DAYS. Anything uninsured beyond that could take YEARS. http://www.fdic.gov/deposit/deposits/insured/faq.html # How long does the FDIC take to pay insurance on deposits after an insured bank fails? Federal law requires the FDIC to make payment as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. Deposits purchased through a broker may take longer to be paid because the FDIC may need to obtain the broker's records to determine insurance coverage. Customers with uninsured deposits receive the insured portion of their account as described above. They will wait longer to receive payment for some or all of their uninsured deposits. The amount of uninsured deposits they may receive, if any, is based on the sale of the failed bank's assets. Depending on the quality and value of these assets, it may take several years to sell the assets. As assets are sold, uninsured depositors receive periodic payment on their uninsured deposit claim.
Yes it is stupid to go to the bank and get the money if you are the average banking client. The populace has been herded into a fear mode from everything they hear in the media. (The same statement can also be applied to a significant portion on the, ahem, traders who post on this site about every little or irrelevant rumor they get from the blogosphere.) If your bank fails, you will have access to your typical account balance within a week. Read somewhere but can't find it (here's a Wikipedia ref, but, well, it is Wikipedia - http://en.wikipedia.org/wiki/Savings_and_Loan_crisis#Failures)) but in the S&L crisis on the late 80's - early 90's, the US lost something like 900-1000 banks to default. So far this year, we have had only 5 bank failures. As a comparison, in 2002 we lost 12 banks, 3 in 2003, 4 in 2004, and 3 in 2007 when this credit crisis began. (http://www.fdic.gov/bank/individual/failed/banklist.html) All in all, I'd say so far so good I guess. On a side note about WM, they have been hitting the air waves HARD trying to solicit new accounts of late, so take it for what it's worth.
There are plenty of stupid people out there. There are the ones that put more than $100K in a bank for a measly 25 extra basis points knowing that the FDIC only insures the first $100K per person. And there are the ones that have a couple thousand dollars and withdraw all of it because they are afraid of losing it. They then take their couple thousand dollars down the street to another bank that has the same risk and the same FDIC insurance. The ones that should worry, don't and those that shouldn't worry, do. Such are the quirks of human nature.
Surely you can't compare a few bank failures in 2002 to 2004 to today's situation. The context is completely different. Even in good times you'll get a few banks to fail from their own mismanagement or simply bad luck in the marketplace. One should not underestimate the seriousness of the current bank failures in the context of the foreclosure crisis and the imminent collapse of Freddie and Fannie.
Like you say, even in good times you get bank failures, as evidenced by the pre-2007 numbers. For a banking "crisis" having only a handful so far is pretty damn good. Don't know if you are old enough to remember stuff from 20 yrs ago, but then it was the "end of the world as we knew it" but we came out of it ok in the end. I'm just sayin'.