A Run On Foriegn Bank

[CAwireman]

Even if its in another country (and not in the US) it still isn’t a good sign…

Link to article posted at calc risk.

http://calculatedrisk.blogspot.com/2007/09/government-guarantees-all-deposits-at.html

“The chancellor of the exchequer, Alistair Darling, this evening promised that the government will guarantee all savings deposits at Northern Rock amid concern that Britain is plunging into its worst banking crisis in decades.”

This is all about bad investments in exotic MBS,
right?

“This evening queues were still stretching out of the door at branches of Northern Rock across the country, with more than £2bn already taken out by anxious savers. The value of Northern Rock shares fell sharply again today, down by 35%, but in late trading it was overtaken by a startling drop in the share price of Alliance & Leicester, Britain’s seventh largest bank.”

Could anything cause this, a run on the banks, to happen in the US again?

Higgybaby

[kewp]

Could anything cause this, a run on the banks, to happen in the US again?

No way could it happen here. Not enough people have any money saved in the bank!

Hah!

[waiting hawk]

“No way could it happen here. Not enough people have any money saved in the bank!”

lmao. That was great

[Bugs]

I was just talking to a friend this morning and he told me that CNN or one of the other news channels just reported that one of the German banks just went down, apparently as a result of their exposure to our subprimes. The news account supposedly said that this marks the first time since WWII that a Gernal bank had gone under, and that it looked like there is a run on banks starting in Germany today.

I just walked in so I haven’t had a chance to verify any of this so you can take it with a grain of salt. Or two.

[citydweller]

test

[HLS]

Of course it could happen. It did a few weeks ago.

Many people haven’t got a clue what is going on.
Accounts that are backed by FDIC insurance are covered to the maximum per the type of account.

Few weeks ago there were plenty of people who withdrew from Counytrywide Bank EVEN THOUGH the accounts are FDIC insured.

Countrywide Bank is paying about the highest interest rate today on FDIC INSURED accounts. Liquid or CD’s.

It will happen again at a different bank.

It isn’t hard to understand what FDIC inurance is and what the limits are.

There is no reason to keep money in an account today that is not FDIC insured (or simiilar coverage)

Most bank money market accounts are not insured.
They are invested in a bunch of debt packaged from Wall Street, including ABS and MBS. BEWARE.

[CAwireman]

Firstly Kewp, well said!

Bugs, here’s a link to the German Bank story:

http://news.yahoo.com/s/afp/20070830/bs_afp/marketsfinancegermany_070830165227

FRANKFURT (AFP) – The head of German bank SachsenLB, which was stricken by losses linked to investments in US subprime home loans, has resigned, the bank said on Thursday.

Herbert Suess, 67, chose “according to his own wishes” to relinquish his responsibilities as chief executive on September 15, while another two directors have been sacked, the bank said.

SachsenLB, a state-run regional bank, was bailed out by the German government and then rescued at the weekend by fellow regional bank Landesbank Baden-Wuerttemberg (LBBW).

LBBW agreed to buy SachsenLB, the smallest regional bank in Germany and the only state-run bank in eastern Germany, to prevent it from going bankrupt.

SachsenLB developed severe liquidity problems, meaning it was unable to cover its liabilities, after losing money with investments linked to US subprime home loans.

Subprime loans are mortgages for borrowers with poor credit history and are highly risky.

Banks invested in them through mortgage-backed securities, complicated financial instruments that plummeted in value as increasing numbers of stretched US borrowers defaulted on their home loans.

SachsenLB admitted before the takeover by LBBW that it had to be bailed out to the tune of 17.3 billion euros (23.6 billion dollars) by the national German savings banks because of its US subprime losses.

And a story on recent bank runs (aug17):

http://www.latimes.com/business/printedition/la-fi-countrywide17aug17,0,5944637.story?coll=la-headlines-pe-business

A rush to pull out cash
“Worried about the stability of mortgage giant Countrywide Financial, depositors crowd branches. In Laguna Niguel, Bill Ashmore drove his Porsche Cayenne to the bank’s office and waited half an hour to cash out $500,000. “It’s got my wife totally freaked out,” he said.
By E. Scott Reckard and Annette Haddad
August 17, 2007
Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.

Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren’t alarmed by the volume of withdrawals from the bank.”

My definition of “A run on the bank” is:
I withdraw my money and put it in the mattress. I don’t deposit it somewhere else. Does this definition hold water?

HiggyBaby

[Anonymous]

Yes it will happen here. Fractional reserve banking is rampant (which mewans that your bank has only 10%, or less, of your money because they loaned out more than they have so they can make 10x the profits. when it is found that many banks are swimming naked, there will be a run on these banks. Yes, FDIC insured mans that the Fed will print the currency to pay these off, but too many and it will be curtains for our dollar. IT may already be too late anyways as they lowered the interest rate, gold and oil shot up and the dollar rate dropped 0.5!

Look out below for the dollar. Suggest you put your dollar IRA’s in foreign ETF’s, Gold company stock, BRIC ETF’s with stop losses at 10% maximum and increase them as their prices rise. It might turn out to be a sweet ride. I have pulled out all funds from the US and am 1/2 back invested this afternoon. Gained 3% in an afternoon thanks to helicopter Ben!

Way to go FED!

The dire is now cast, the US dollar is toast unless the other central banks print their currencies and lower their rates. Expect China, Mid East and others to sell, sell, sell US bonds, tired of losing billions. The USD is not worth bailing out any more.

Then watch the market crash by half!

Good Luck to us all then.
StevenO

[cr]

What’s the best way to put some of your savings into gold?

Other than buying those “rare” dollar coinds for $20 a pop.

[HLS]

COOP,
Did you see my reply about this on page 2 of the 50pt Cut thread ??

http://piggington.com/50_point_cut

[cr]

HLS, I just read it. email me at dcoop14 at hotmail with the guy you know if you have a chance.

Thanks.

[Author]

Posts