I'm not aware of a bank run on a U.S bank since the Great Depression--although it has probably happened at least once since.
Countrywide customers run to save deposits
After many depositors tried to withdraw money this week, bank assures customers that liquidity issues pose no risk to FDIC-insured deposits.
August 17 2007: 7:38 PM EDT
NEW YORK (Reuters) -- Withdrawal slips in hand, customers lined up at Countrywide Bank branches on Friday to take back their money, as parent Countrywide Financial Corp. tried to assure investors and depositors that it and its bank were stable.
Countrywide Bank issued a statement Friday that liquidity issues affecting its parent did not affect federally insured deposits at Countrywide Bank.
Countrywide Bank said it has more than $107 billion of assets and 105 banking offices.
Thursday, Countrywide, the largest U.S. mortgage lender, said it drew down an entire $11.5 billion bank credit line as a credit shortage limited access to short-term cash.
By noon Friday, more than 40 Countrywide customers had been served or were waiting in line at the branch in a Los Angeles suburb, waiting upward of an hour and a half to withdraw money from their accounts.
"The bottom line is it's your money," said Yumi Oshima, a graphic designer who had come to move her more than $100,000 out of Countrywide certificates of deposit if the penalty was not too stiff.
Oshima wondered how much worse the situation would become. She knew that her two CDs were insured by the Federal Deposit Insurance Corporation (FDIC) for $100,000, but said she was still concerned.
"Do I trust them?" she asked, referring to federal banking regulators. "They're not doing so well for the entire economy."
Others like Tim Shinkle, 35, who works as a grip in the film business and has a money market account with Countrywide, expressed similar concerns and sentiments.
"I don't trust the FDIC insurance. The Federal Reserve seems to me, at least, in a slightly shaky gray area," Shinkle said. "I know a little about what happened in the 1930s [market crash]. It smells like it could be the same."
'Guy doing the run?'
Shinkle said he had been anticipating a meltdown in the credit markets given the rising number of mortgage defaults and foreclosures.
"It just seemed like it had to happen - that there would be some ugly mortgage crunch," he said.
Shinkle said he still was not sure where he would put his money, but said he was thinking of buying gold. He expressed mixed feelings about even being at the Countrywide branch.
"I really thought about panic mongering. I thought, 'Am I going to be the guy doing the run on the bank?' That didn't appeal to me. But dealing with the insurance afterward and possibly losing my money didn't appeal to me either," he said.
Some customers were told that wire transfers would take at least two days to process, angering Albert Gasparyan, 49, who had been planning to withdraw his funds for an upcoming property purchase before Countrywide's mortgage business problems became known.
"I'm really angry. It's going to mess up everything," said Gasparyan, who needs a fast transfer to close his deal. "I heard the news and came in because I'm afraid I'm going to lose my money."
Across town at a branch in the wealthy suburb of Encino, retired teacher Joe Lardner said he was not concerned about his certificates of deposit because they are insured by the FDIC.
An Encino branch employee said that 10 customers that he served were there not to withdraw funds, but to be reassured that their money was FDIC-insured.
Re: Could we be witnessing a bank run at Countrywide?
Very interesting article. Is there a historical precedent for depositors recieving FDIC insurance benefits at a failed institution for deposits that were FDIC backed? Or is FDIC insurance still an untested phenomenon? I'd hate to be a guinea pig in matters like this.