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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 463588  
Subject: Next: The Mother Of All Bank Runs? Date: 10/4/2008 5:29 AM
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Opinion piece by Nouriel Roubini. --FY

http://www.forbes.com/opinions/2008/10/01/goldman-morgan-run...

It's plain that the current financial crisis is worsening in spite of--or perhaps because of--the Treasury rescue plan.

The strains in financial markets are becoming more, rather than less, severe in spite of the nuclear option of a $700 billion package: Interbank spreads are widening and are at a level never seen before; credit spreads are widening to new peaks; short-term Treasury yields are going back to near-zero levels as there is flight to safety; credit default swap (CDS) spreads for financial institutions are rising to extreme levels as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package.

Financial institutions in the U.S. and in advanced economies are going bust. In the U.S., the latest victims were Washington Mutual (nyse: WM - news - people ) (the largest U.S. savings and loan) and Wachovia (nyse: WB - news - people ) (the sixth largest U.S. bank). In the U.K., after Northern Rock (other-otc: NHRKF.PK - news - people ) and the acquisition of HBOS by Lloyds TSB (nyse: LYG - news - people ), you now have the bust and rescue of Bradford & Bingley; in Belgium you had Fortis (other-otc: FORSY.PK - news - people ) going bust and being rescued over the weekend; in Germany, Hypo Real Estate, a major financial institution near bust, has also needed rescue.

...

When investors don't trust even venerable institutions like Morgan Stanley and Goldman Sachs, you know that the financial crisis is as severe as ever. When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets, you know this is a global crisis of confidence in the financial system.

The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started, as foreign banks are worried about the solvency of U.S. banks and are starting to reduce their exposure. And if this run accelerates--as it may now--a total meltdown of the U.S. financial system could occur.

...
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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257519 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 6:29 AM
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So, I hesitated to post these two links as well, because of the whiff of tinfoil-hattery they carry.

The first is fact, and the second is rumor. The fact is uncontested, so far as I have read. Wondering whether it is related to the second (rumor, which seems to be spreading around the blogosphere, with others claiming to be hearing similar things from "people they know at a bank"), and Nouriel Roubini's op-ed, is where I begin to fear I'm stepping firmly in tinfoil-headpiece territory.

------
http://www.armytimes.com/news/2008/09/army_homeland_090708w/...

Brigade homeland tours start Oct. 1

The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys.

Now they’re training for the same mission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

...

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.

...


-----
http://www.321gold.com/editorials/willie/willie100208.html

...

This from a friend in Atlanta with strong banking connections: "Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading "WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME."

So the banks are in need of a respite, a break, a holiday. They need to shore up their positions. Economists and bankers avoid revealing the consequences of extended absence of short-term credit supply. Imagine all the supply chain DELIVERY routes being interrupted for lack of short-term credit, certain to interrupt the supply of food, gasoline, building materials, basic household wares, simple hardware, and more. The short-term credit would certainly also disrupt payroll streams for companies, inventory supply for retail chains, durable goods purchases by consumers (like washing machines & refrigerators), the maintenance of basic machinery (like cars, trucks, computer, communications), even cash dispensed at ATMachines.

...


-----

I personally think the chances of the "planned bank holiday" rumor being true are extremely low. The panic that would ensue would be a disaster, economically.

However, as with any risk, it may be worth evaluating the effects on your life if it did come to pass. What necessities do you buy over the course of a week? Food? Gasoline? It might not be a bad idea to accumulate a little cash, and by cash I mean, "physical money in your hands", not in a bank.

I'm not talking about withdrawing a huge chunk of your accounts, just having a few hundred bucks (or whatever amount is dictated by your answer to the "what necessities?" question) on hand. Of course, this is assuming that if such a "holiday" came to pass, that businesses would even be open to sell you gas, food, etc for cash. Maybe, maybe not. (Maybe not, if all their employees can't get to work because they can't buy gas...)

Anyway, in the economic weirdness we seem to be experiencing now, this seems prudent to me, and in line with other emergency preparations like having durable food, flashlights, etc in the house. What's the worst thing that happens if you do it? You lose the 2% interest you might've gotten from a bank account? :-P

--FY

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Author: DrBob2 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257521 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 7:21 AM
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So, I hesitated to post these two links as well, because of the whiff of tinfoil-hattery they carry.

More importantly, why did you post them together? Do you think they are linked? Do you live near Fort Stewart?

DB2

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Author: windhoek Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257530 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 8:51 AM
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Reliable word has it that BofA bank branches received a shipment of signs last week, reading "WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME."

This sounds very suspect. If this were going to happen I don't think anyone one would be printing out and mailing signs in advance (to all of the banks in America?).

David

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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257533 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 9:21 AM
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This sounds very suspect. If this were going to happen I don't think anyone one would be printing out and mailing signs in advance (to all of the banks in America?).

I agree that it sounds unlikely. As for the signage, I assumed that it wasn't the Fed or other central source sending it to BoA branches, but the BoA mothership. Having worked for very large corporations, including my current employer, I can readily believe that somewhere, there is a person or persons with a policy handbook that dictates the exact font and colors that must be used in Official Conforming End Of The World As We Know It signage that all branches must display. :-P

Like I said, it's probably tinfoil-hattery, that one.

OTOH, I can easily believe that individual banks, or branches of banks, may experience runs and cash shortages. People are spooked. Most banks carry very little cash relative to deposits. Banks are going under. Depending on how much one relies on debit cards or credit cards or ATMs for their daily purchases, it's worth considering how to cope with a short-term interruption of those services, no matter the cause.

--FY

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Author: MegHammond Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257536 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 9:34 AM
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how to cope with a short-term interruption of those services, no matter the cause.

short term being two weeks or two months?

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Author: FoolYap Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257539 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 9:46 AM
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short term being two weeks or two months?

Well, I wouldn't personally call a two-month loss of ATM/debit/credit services "short term". I think that would be pretty disastrous for the economy, and likely affect some permanent changes on it.

--FY

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Author: DoctorOptimist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257543 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 10:11 AM
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The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started, as foreign banks are worried about the solvency of U.S. banks and are starting to reduce their exposure. And if this run accelerates--as it may now--a total meltdown of the U.S. financial system could occur.


It's hard to explain the dollar strength and dropping long bond yields, if the "whole world" has a distrust of this country and its financial institutions

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Author: Pituophis Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257551 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 10:49 AM
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http://www.forbes.com/opinions/2008/10/01/goldman-morgan-run...
.......The U.S. and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 basis points reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.......



I think they'll finally come to that realization....I think...

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Author: Iaato Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257559 of 463588
Subject: Re: Next: The Mother Of All Bank Runs? Date: 10/4/2008 11:38 AM
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OTOH, I can easily believe that individual banks, or branches of banks, may experience runs and cash shortages. People are spooked. Most banks carry very little cash relative to deposits. Banks are going under. Depending on how much one relies on debit cards or credit cards or ATMs for their daily purchases, it's worth considering how to cope with a short-term interruption of those services, no matter the cause.

As of Friday, banks are now allowed to carry $0 reserves. This puts banks into fiscal make-believe. They can take your hard-earned dough, spin it up overnight into investments in the Casino economy of whatever sort, and not carry a single dollar in their vaults. My question is why on earth would you keep your money in a facility where it was not available? I think bank runs are inevitable, and the timing of a bank holiday would be political in nature.

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