Before You Run To The Bank

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8 Responses

  1. Grandy says:

    It's already starting if I just read right; Citi buying Wachovia.

  2. Patrick says:

    That happened well before the vote was held. I heard about it on the radio while driving to court this morning.

    Wachovia overextended itself trying to become the equal of Bank of America in the south, and so such is life. That's not a bank run. That's an acquisition.

    More's the pity, as I regret that everywhere I drive I'll have to see that damned umbrella that Citibank stole when it absorbed Travelers.

  3. Patrick says:

    From the bank's own site, this is pretty damned funny: Wachovia Corporation to become a focused leader in retail brokerage and asset management.

    If I got into a horrible accident tomorrow, my heirs could announce: Patrick to become a focused brain hooked to a breathing tube, with concentration in blinking and making guttural noises.

    Wachovia was always first and foremost a branch bank.

  4. Clay says:

    Every fool standing on the corner knows that you have to distribute your 100,000s across multiple banks for insurance reasons. Maybe we'll all at least learn that lesson as a nation, and stop living beyond our recourse to federal guarantees.

  5. Brian Dunbar says:

    Every fool standing on the corner knows that you have to distribute your 100,000s across multiple banks for insurance reason

    I'm not sure many fools on the corner have multiples of $100,000 to spread around.

    Check back in a few years, if inflation gets a little bit out of hand.

    "Hey, Ma – look, I'm a millionaire!"
    "Henry – that's your lunch money. Stop fooling around and get to school."

  6. dave says:

    I assume you're talking about the blog post that you linked to as the 'solution.' Unfortunately, it doesn't address the underlying cause of the meltdown – namely mark-to-market accounting. Unless banks can get the undervalued assets off their books, they'll remain in distress.

    The only alternate solution I can think of is suspending FASB-157, but I'd be shocked if it were that easy because someone would have already thought of it.

  7. Patrick says:

    The cause of what you're calling the meltdown, and what I'd call the wisdom of the market, is debatable. But there's no question that the immediate cause of last week's trouble was an incipient bank run by money market holders.

    The FDIC solution would fix that, while stymieing the plans of those who are withholding credit or holding onto bad assets in the hope that they can use other people's money, without their consent, to save themselves from the consequences of their recklessness.

    The vast majority of Wachovia depositors are in better hands with Citibank, and Wachovia deserves what happened to it. I hope that the plaintiffs' security bar takes it out of the hides of Wachovia's board, and I'm sorry that that probably won't happen to the boards of Freddie and Fannie.

  8. Patrick says:

    For those who suspect that many private investors are just sitting on their capital waiting for government money, note that Wells Fargo put in an upset bid for Wachovia last night, on substantially better terms for the shareholders, with no government involvement.

    I don't blame Citi for trying to steal Wachovia with taxpayer help, but I'm glad it didn't work.