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Run on Bank in England!
Old 09-15-2007, 06:23 PM   #1
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Run on Bank in England!

Bankers fear 12bn run on Rock - Times Online

This is an interesting story. I wonder if it will be picked up here in the USA. If so will it cause other problems here.

With on line banks you don't even have to run to the bank.

Will it be called a bank "Click" in the future?
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Old 09-15-2007, 07:01 PM   #2
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CountryWide recently had a bit of a run on their bank. I had a CD at IndyMac, one of the biggest Alt-A lenders, and when I asked them to cut me a check at maturity, they made a fairly aggressive effort to keep me there. I suspect a lot of people are pulling out their deposits.

BTW, both CountryWide and IndyMac have some of the highest CD and money market rates in the country right now.
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Old 09-15-2007, 07:06 PM   #3
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I wonder if anyone knows if the UK has the equivalent of the FDIC. I think that it has prevented bank runs, I was in Texas during the S&L crisis and things were pretty calm.
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Old 09-15-2007, 10:02 PM   #4
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Originally Posted by dex View Post
Bankers fear 12bn run on Rock - Times Online

This is an interesting story. I wonder if it will be picked up here in the USA. If so will it cause other problems here.
<snip>
I heard about this on NPR on Fri. They had a short story with a couple of proper Englishmen babbling on about it. "This is all because of the problems the US is having with their home loans...".

We'll see...

-CC
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Old 09-16-2007, 12:04 AM   #5
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I wonder if anyone knows if the UK has the equivalent of the FDIC. I think that it has prevented bank runs, I was in Texas during the S&L crisis and things were pretty calm.
From CR:


I've found this: the Financial Services Compensation Scheme
1. I have my money in a joint account in a High Street bank. How would FSCS pay compensation if the bank failed?
The compensation limit of 31,700 applies to each depositor for the total of their deposits with an organisation, regardless of how many accounts they hold or whether they are a single or joint account holder. In the case of a joint account FSCS will assume that the money in that account is split equally between account holders, unless evidence shows otherwise.
This means that each account holder in a joint account would be eligible for compensation up to the maximum limit.
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Old 09-16-2007, 01:38 AM   #6
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I wonder if anyone knows if the UK has the equivalent of the FDIC. I think that it has prevented bank runs, I was in Texas during the S&L crisis and things were pretty calm.
I guess it is how you define 'calm'... no, there were not runs on banks but just the opposite...

Before some of the S&Ls were going under, they offered some high interest rates to get funding... and people were flocking to them to get that money knowing they were protected... we had people pulling money out of the bank I worked at just to do that...
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Old 09-16-2007, 01:43 AM   #7
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I read an article about one couple who was very worried as all their savings... 2 MILLION pounds were on deposit at the bank... not a good investment IMO..

Sounds like it is history and someone will get a bargain basement piece of business..
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Old 09-16-2007, 12:16 PM   #8
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Before some of the S&Ls were going under, they offered some high interest rates to get funding... and people were flocking to them to get that money knowing they were protected... we had people pulling money out of the bank I worked at just to do that...
It's been a while since I looked at the FDIC rules, but I thought that they only paid back your original principal and none of the accrued interest. Not sure I would chase the highest yield at a bank that looked like it might fail.
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Old 09-16-2007, 12:31 PM   #9
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As I understand it, this is a liquidity problem, not an asset quality problem. Their loans haven't gone bad in droves; its just that the market isn't funding anyone now and these guys don't have enough alternative funding sources. So the Bank opf England (Fed equivalent) has stepped in, and I imagine they will have no ,long term issues.
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Old 09-16-2007, 02:52 PM   #10
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Always the devil's advocate here: what if there were NO deposit insurance? Imagine that: depositors would (if they were wise) make an institution prove that it handles money wisely. With FDIC and equivalent, there is big-time moral hazard. Many countries today have zero public guarantees, yet some of them are the safest banks in the world (e.g. Switzerland.) Next chapter: how government guarantees make people do other idiotic things like build mansions on sand bars next to the ocean.
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Old 09-16-2007, 06:06 PM   #11
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It's been a while since I looked at the FDIC rules, but I thought that they only paid back your original principal and none of the accrued interest. Not sure I would chase the highest yield at a bank that looked like it might fail.
IIRC, you DO get your interest... up to the day the bank is closed. But the FDIC can break any contract that the bank has including CD rates.. I think that they left it up to the buying bank to determine if they wanted to continue to pay the high rate or have them cancel the CD before they bought it...
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Old 09-18-2007, 09:28 AM   #12
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As I understand it, this is a liquidity problem, not an asset quality problem. Their loans haven't gone bad in droves; its just that the market isn't funding anyone now and these guys don't have enough alternative funding sources. So the Bank of England (Fed equivalent) has stepped in, and I imagine they will have no ,long term issues.
All Ponzi schemes are inevitably liquidity problems not a problem of bad loans. And the plethora of off-balance sheet financing by banks in packaging home mortgages at AAA rated investments is leading consumers to have no faith in what their banks are telling them so they panic. It will be interesting to see just how much the government will be willing to pony up for the Ponzi bankers. And the resets don't start in earnest for another 90 days. Don't think this is the last of the "liquidity issues" that will have world governments bailing out banks.

As the ultimate Ponzi player of course the government can inflate away promised payments so everyone can get back to square one. I think this is the scenario Greenspan sees when he said over the weekend in a couple of years there will be a need for double digit interest rates. An interesting comment by Greenspan over the weekend was that world governments have an obligation to save the greedy and arrogant in order to preserve the capital markets and avoid hurting the innocents.
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Old 09-18-2007, 09:32 AM   #13
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Hey, I just heard a piglet squeal!
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