Take Your Money And Run?

July 14, 2008

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bank vaultDoes IndyMac Bank’s failure this week make you want to run right down to the bank and take your money out?

I received that very question from some clients this morning. David and Rhonda had heard that one of our local banks was in trouble and wanted to get my opinion on getting their money out. I hope my response caught them before they made the mad dash to the teller window.

Here’s what I told them:

“I doubt there’s a big rush to pull money from XYZ Bank.”

Remember, your money isn’t really “in” the bank. They’ve lent it out to others and they are required to have amount of deposits on hand to cover normal business. However, if everyone takes their money out at once it’s a “run on the bank” and will certainly cause the bank to go under (a la The Depression). Remember what happened in “It’s A Wonderful Life“?”

According to CNN, the FDIC had to close IndyMac because customers made a run for their money withdrawing more than $1.3 BILLION. Ouch!

“This institution failed today due to a liquidity crisis,” OTS (Office of Thrift Supervision) Director John Reich said.

What Should You Do To Protect Your Money?

  • Make sure you don’t have more than $100,000 in any one bank
  • Sit tight and don’t increase the chances your bank will fail by withdrawing your money. That’s why there’s an FDIC (Credit unions have the NCUA so they’ll be OK, too).

The last thing the government wants to see is banks failing and there are programs in place to make sure you don’t lose your money (up to $100,000 per person - not per account). It just increases all our costs when you take yours out.

There’s lots to worry about in the economy right now but so far, this isn’t one of them. You can be sure that if I’m concerned, I’ll be letting you know.

Warmly,

Cindy Morus

Posted by Cindy Morus | Filed Under Protect Yourself 

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