Run on Bank Helped Kill WaMu, But Your Money Is Safe
Posted Sep 26, 2008 10:44am EDT by Aaron Task in Investing, Recession, Banking
Related: WM, JPM, XLF, WB, ^DJI, ^GSPC
In the biggest bank failure in U.S. history, the Federal Deposit Insurance Co. seized Washington Mutual's assets Thursday. The FDIC then quickly sold most of WaMu (that's assets and liabilities) to JPMorgan.
Simply put, WaMu was victimized by a classic "run on the bank." Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined.
A longer explanation is WaMu was victimized by mismanagement and misguided bets on exotic (and toxic) instruments such as option adjustable-rate mortgages.
The deal has major ramifications for JPMorgan and the banking industry as a whole, as Henry and I discuss in a forthcoming segment.
For the vast majority of people who bank at WaMu, which had 2200 branches and $188.3 billion of deposits as of June 30, the important thing to remember is your deposits are insured up to $100,000, and the Federal government will go to every extreme to make sure it's available.
"There will be no interruption in services and bank customers should expect business as usual come Friday morning," FDIC Chairman Sheila Bair told reporters last night.
The sobering truth, however, is that repeated declarations about the sanctity of FDIC insurance from Bair, President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke and others failed to quell concerns among WaMu's customers. That suggests more "bank runs" could be in the offing unless the government moves quickly to restore confidence.
Jim Rogers says don't keep more than $100K in the bank.
jerZ07002
quote:
Originally posted by Trancer-X
Jim Rogers says don't keep more than $100K in the bank.
is that the extent of your insight? That's pretty basic knowledge for anyone with at least a savings account.
Groundhog Boy
quote:
Originally posted by Trancer-X
Jim Rogers says don't keep more than $100K in the bank.
Many of the people that did this to WaMu and Wachovia were under $100K, they just don't know any better. I had people in the mailroom at my office mention whether they should remove their money from WaMu 2 weeks ago in the midst of the investment bank collapses.
The other chunk of withdrawals was retail/small business, which is why they upped the FDIC limits to $250K with the Senate bill.
Trancer-X
quote:
Originally posted by jerZ07002
is that the extent of your insight? That's pretty basic knowledge for anyone with at least a savings account.
What else do you need to know?
Trancer-X
quote:
Originally posted by Groundhog Boy
Many of the people that did this to WaMu and Wachovia were under $100K, they just don't know any better. I had people in the mailroom at my office mention whether they should remove their money from WaMu 2 weeks ago in the midst of the investment bank collapses.
The other chunk of withdrawals was retail/small business, which is why they upped the FDIC limits to $250K with the Senate bill.
I wouldn't keep anything in the bank, to be honest. I don't care if it's insured or not. There's just no point.
If you're not making at least 12-15% interest then you're losing it to inflation anyway. :(
jerZ07002
quote:
Originally posted by Trancer-X
What else do you need to know?
i don't necessarily need to know anything, i was just surprised that you quoted someone to relay information that almost every american on this board already knows.
jerZ07002
quote:
Originally posted by Trancer-X
I wouldn't keep anything in the bank, to be honest. I don't care if it's insured or not. There's just no point.
If you're not making at least 12-15% interest then you're losing it to inflation anyway. :(
considering the last CPI number was around 5% annualized, and that number is sure to go down with the decrease in commodities costs, you are way to high in your interest requirements. You aren't getting 15% interest on any deposit or debt instrument, and yields on assets are rarely that high unless they are somewhat speculative. If you get 3-4% today you are probably breaking even, consumer prices are about to take a dive.
Trancer-X
quote:
Originally posted by jerZ07002
i don't necessarily need to know anything, i was just surprised that you quoted someone to relay information that almost every american on this board already knows.
Who did I quote? You lost me there.
Groundhog Boy
quote:
Originally posted by Trancer-X
Who did I quote? You lost me there.
quote:
Originally posted by Trancer-X
Jim Rogers says don't keep more than $100K in the bank.
:conf:
jerZ07002
quote:
Originally posted by Trancer-X
Who did I quote? You lost me there.
Under an article you quoted, which states in its text that deposits are insured up to 100K, you said "jim rogers says don't keep more than 100K in the bank." Since that was all you said I assumed your point was keep at most 100K in the bank and the support for that statement was the article.
Trancer-X
quote:
Originally posted by jerZ07002
considering the last CPI number was around 5% annualized, and that number is sure to go down with the decrease in commodities costs, you are way to high in your interest requirements. You aren't getting 15% interest on any deposit or debt instrument, and yields on assets are rarely that high unless they are somewhat speculative. If you get 3-4% today you are probably breaking even, consumer prices are about to take a dive.
CPI? lol
How about M3? Oh yeah, they stopped publishing that in 2006.
Hmmm, I wonder why?
I like how Ron Paul grills Helicopter Ben in this video:
Trancer-X
quote:
Originally posted by Groundhog Boy
:conf:
Was that a quote? I said that he said? I fail to see any quote :conf:
