This smells to me of complete internet rumour BS (in this day and age if this was happening it would be on the front page of CNN.com about 30 seconds after the letters arrive). Though apparently it happened it during the start of the Great Depression (It was one of FDR’s first acts as president). And at this point I’m quite prepared to assume the worse about the current crisis. Anyone know anything to confirm or debunk this:
http://www.financialsense.com/fsu/editorials/willie/2008/1002.html
I hope it’s wrong. The county thing is a bummer, I’m sure there are probably counties in trouble because of the situation, and more so their employees, who often don’t have a choice but to vest in the county’s retirement packages, which are similarly invested in junk.
As for the shutdown, if that happens, game over. Confidence will evaporate, and no bank’s going to be able to manage the run when/if they start the system back up again. Even a strong rumor of this will compound the problem. How long can most people go without access to their banks or ATM? Worse, no credit/debit card? As a retailer, you’d probably think twice about assuming that they’ll get paid for credit purchases.
Cash Only will be the new game. Hope you’re stocked up at home if that happens. Not just day to day stuff…the real end of the world stuff, like ammo. The folks who don’t have money (i.e., everybody living week to week that can’t cash their paycheck) still require the basics, and if the cupboards are bare, people get desperate. The ripple effect would be astounding, to say the least.
That said, it’s a new site to me, I don’t know what to think of it. I couldn’t find anything similarly convincing, and it appears someone might have been “detained” because of the rumor. The shock of a shutdown would kill the whole point of the last couple weeks, although there are some dicey issues approaching, such as the credit derivatives coming up. (Monday, Lehman’s junk comes due, for several billion, and the total market is $54 trillion in October.) Still, derivatives balance each other, but who knows how that’s been affected by the recent plays and Fed actions.
Anyway, it looks to be a rumor, but these days I’m not trusting anything. Lehman was fine a few weeks ago, everything till then was a blip. So either we’re being boldly lied to, or the folks “managing” this are completely lost. Probably a combination of both. I can’t say the BoA thing won’t happen, I just don’t think it’s relevant now.
Link to the rumor (some details are different, same idea):
http://www.businessweek.com/ap/financialnews/D93HJ0700.htm
Link to a site that tends to be fairly good with predictions, IMO, so far during this mess, as long as you add the usual dosage of distrust:
http://bankimplode.com/
It’s not like the 1930’s, where the only ways to access your money is going to the bank or writing a check. Think about the billions of electronic transactions that would bounce. It seems to me that “shutting down the banks” would be a more harmful thing to do than not.
As Snopes said about the rumored martial law signs being distributed in the Clinton era: why can’t they just use their regular “bank closed” (or “road closed” in the case of martial law) signs? “Shipment of signs?” That right there smacks of the same type of urban legend conspiracy theory as the Martial Law Sign distribution rumour.
Passing on emails of this crap is a good way to cause lots of trouble for the whole of the USA population. Return the email and let them know that they giving cutting their own throats a good try here. Spreading this crap by any means is a bad way to go.
Why in the hell would the banks need to be shut down? Even when a bank FAILS there isn’t a one week closure, thanks to the FDIC most customers get to access their funds the next business day!
This is a toxic, toxic BS rumor.
How many hundreds of branches does Bank of America have? Do you really think that a memo that went out to all branch managers wouldn’t leak in a heartbeat?
Ugh, this isn’t helping much, but I just went to the link I posted, and the quoted article is added. That doesn’t make it legit, but they’ve been pretty good about sifting the garbage, so while the BoA part might not be true, the source might be decent. I still doubt the bank shutdown thing, simply because it would kill any remaining confidence, here and overseas.
The thing that makes me a little nervous about dismissing this outright is that not too long ago I was reading a number of sources, MSM and otherwise, that were talking about how the FDIC was edging closer to problems. Specifically, they were saying a WaMu or Wachovia collapse, and just a couple more small banks would wipe out FDIC’s reserve. Now both are effectively gone, and there are still a number of banks that are badly leveraged and making people nervous. (National City’s leading the pack on being the next failure, according to some.)
So, if those other sources were even close to being right, perhaps the FDIC or Fed have reached a limit of sorts, and can’t properly close too many banks and cover the accounts. If so, they’d have no choice but to shut down the system until they juggled things around better. It might destroy confidence, but it’s better than not having any money when you’re forced to close the banks. Or maybe the derivative issue is stretching US credit lines beyond their ability to print more money.
I don’t know, but seeing the link on a site that’s been ahead of the MSM for months now is making me a touch jittery. Hopefully it’s just a blip…
WaMu was closed by forcing a sale to JP Morgan Chase, not by shutting it down an handing out cash to depositors. While I’m not certain the FDIC didn’t use some of their cash stockpile to do this, it uses a lot less of the stockpile than outright taking it over, which is why they prefer to do it that way. But yes, the core of that is correct, in that a total takeover of WaMu would have nearly (or entirely) used up the FDIC reserve fund.
Well, at least that part of the rumour is not totally unrealistic - shuttung down banks to prevent bank runs is occasionall done, Argentina, for example, did so in early 2002 when the parity of the peso to the dollar was abandoned (story). The idea is that a momentary panic might urge people to withdraw their funds all at once, which could start the real trouble in the first place and bring even solidly run banks down. If this happens to several major institutions simultaneously, this could be too much even for a government-controlled insurer like the FDIC. A temporary closure could give the public sentiment a break to calm down.
I’m not even sure it would take a real panic at this point, looking at how the credit markets are playing out recently. Just enough people being nervous enough to draw out a little extra reserve, coupled with the slightly better off folks drawing out amounts over $100,000 might be enough to force the banks to borrow more than their balance sheets can afford. They’d either hit a credit wall, or the costs to borrow would destroy any remaining safety net they maintained.
It’s not all bad, there are banks that have decent ratios, but most of the bigger banks are pretty highly leveraged, and every time a known entity collapses, whether it’s a bank or Fannie/Freddie, or AIG, or whatever, those jitters increase and more people take more precautions. It’s a catch-22. If it continues, at some point a threshold will be passed, and people won’t be as calm as they’ve been. Then things could get interesting.
Hopefully not. I much prefer mundane…
If the Fed is shutting down all the banks, why is Bank of America the only one supposedly sending out memos and sign distributions?
Plus, the Fed doesn’t have regulatory power over a large number of retail financial institutions, the Office of Thrift Supervision and the National Credit Union Administration have regulatory power over literally thousands of financial institutions.
The reason why the rumor doesn’t mention OTS or NECU is because most people don’t know about them, but paranoia over the Big Bad Fed has a long history.
And the fact that this rumor got posted on some-one’s blog has absolutely zero credibility, you understand. What, the blog owner couldn’t contact anyone at one of tens of thousands of institutions that would potentially be affected for confirmation?
I, too, think the shipment of signs points to this being untrue.
I don’t see how a shutdown like this would even be possible. I get paid through electronic bank deposit and have $1.32 on me at the moment, and that’s about $1.32 more than I usually have on me. If I couldn’t make a debit purchase, I’d miss work and run out of food in a few days. Millions of people are the same. House and credit card payments would not get made. Airlines and hotels would shut down.
I might believe a cap on how much could be withdrawn from savings, but to shut down completely, including checking and ATMs, is a little too much.
The problem with living as I do in a state named “Washington”, and businesses with “Washington” in their names, is that until this whole fiasco started, I’d always assumed Washington Mutual was a regional, Washington (state)-based bank. (I suppose that, had I been a WaMu customer, I’d have known otherwise.)
I guess my mistake is similar to that of a lady I used to work with who was a Washington Redskins fan because, as a little girl, she assumed they were our local NFL team. :smack:
It was. Well, it had grown nation wide through purchases, but it was founded and headquartered in Seattle, and was largest on the West Coast.
The OP’s link goes to a bunch of guys who appear to be heavily invested in gold. It’s certainly in their interest to foment panic about the money supply.
I am a financial services lawyer. If the Fed were telling banks to get ready for a shutdown, I would know. They are not. Nor is there any reason to think that a bank holiday is even remotely plausible. To the contrary, regulators will do everything in their power to keep banks open.
Ah, but you forget, in “Web 2.0”, blogs written by random teenagers and basement-dwelling losers are “the Straight Dope.” :rolleyes: