Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

STOP the bank panic NOW

Posted by sanityinjection on July 15, 2008

I am furious with the massive wave of irresponsibility going on with regard to the banking industry. First a US Senator (Chuck Schumer) publishes what should have been a private letter to a federal regulatory agency expressing concern about the viability of the IndyMac bank. This of course creates a panic, depositors pull out, the bank fails and the FDIC has to cover deposits with over $4 billion in taxpayer dollars. (Senator Schumer should be censured by the Senate for his unbelievable irresponsibility. See WSJ op-ed on this here: http://online.wsj.com/article/SB121607771017452513.html?mod=opinion_main_review_and_outlooks)

Now we are being treated to breathless stories in the media speculating on which banks are going to fail next. How is this helpful? Only as an afterthought do they remind people that all bank deposits up to $100,000 are insured by the federal government through the FDIC. What this means is that even if your bank were to go under, as long as you have less than $100,000 in your account you will still get every dollar of it. Therefore, there is NO NEED to rush to your bank in a panic to withdraw all your cash.

Wouldn’t it be nice to see this headline in a newspaper: “NO NEED TO PANIC FOR MOST PEOPLE, BANK DEPOSITS INSURED UP TO $100,000”. You can’t tell me that’s not relevant news for millions of Americans. Instead, ABCNews and other news outlets are publicizing the names of banks on the FDIC’s list of institutions that they are worried about. Thanks a lot, that’s soooo helpful.

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One Response to “STOP the bank panic NOW”

  1. sanityinjection said

    Update: Two banks with a total of 28 branches in the Southwest were closed over the weekend and taken over by the FDIC, but there was no panic. Why? Because the feds, for once, did something the smart way and arranged for another bank, Mutual of Omaha, to purchase all assets in excess of the $100,000 FDIC limit. So everybody’s money is safe, and the banks are operating under new management.

    Banks are like any other business. Some of them are going to fail from time to time, but it doesn’t have to mean we’re headed for a depression if the government, and the media, can avoid creating a panic.

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