Bank Runs Resemble The 1930's

Today's "Bank Runs" resemble the US in the 1930's.

Depositors, frightened that their money will not be "there", rush to transfer their funds to cash - despite years of indoctrination that their money is "safe" as long as their account is FDIC insured and under $100,000 per account.

But in the midst of a nationwide credit crunch, there is still the fear that even "safe" money will be unavailable or only made available in inefficient quantities for the transaction of business or paying of bills. If people fear falling behind on their mortgage already just because rising fuel prices have strained their budget to the limit, there's no margin for error in paying bills in a timely fashion.

People want to eat on time and they don't want to be thrown out of their home because a Federal Regulator tells them "as soon as we figure out what's going on in a few weeks you'll get your money - but don't worry, it's SAFE!"

That's why for the first time in over a generation, we're seeing bank runs that resemble the 1930's.

Experts suggest that to avoid these problems, depositors should transfer their accounts at the first hint of problems... not after the problem has become front page news. This usually means consulting lists of under capitalized banks and requires more effort than individuals apply to their financial lives. Here is such a list of risky banks in Georgia but finding one for your particular community may be challenging, though worthwhile if you wind up avoiding trouble due to a "Bank Run".

The Certificate of Deposit Account Registry Service

The Certificate of Deposit Account Registry Service lets you get FDIC insurance for more than $100,000 in deposits by dividing the money into separate CD's of $100,000 that are all insured.

This may be the best savings account option for bank customers who were tired of having to deal with multiple banks so that all of their deposits would be insured.

From Minyanville.com

Here’s how CDARS works:

* You make deposits through a single member bank.

* Your funds are divided into CDs of less than $100,000 each to ensure that principal and interest receive full FDIC insurance coverage.

* The CDs are issued to member banks in the Promontory Interfinancial Network.

* When funds are sent out of one bank, an equal amount is sent to the originating bank from other members of the network. This keeps the entire amount of the deposit in the community of origin while assuring full FDIC coverage.

* A bank making CDARS transactions can select its own interest rate and therefore doesn’t have to pay an artificially high national brokered rate to attract new funds.

* The smart customer therefore shops around for the best rate.

* The customer deals with one bank, receives one monthly statement and earns a single interest rate.


In general, local or regional banks offer the CDARS program while major banks such as JP Morgan Chase (JPM), Wells Fargo (WFC) and Wachovia (WB) do not. The CDARS program is available through 1,650 banks in all 50 states and the District of Columbia – think Apple Bank for Savings, Security First Bank of North Dakota or Alaska First Bank & Trust.

The American Bankers Association has endorsed the product, saying “CDARS allows banks to offer customers security as well as the convenience of one-stop shopping. It’s good for banks, depositors and the economy.”