Posted by: endithinks | September 18, 2008

On Banks

I am starting to get worried.  I have been reading a lot about these huge banks going under and today the latest in the rumor mill is that Washington Mutual the largest thrift bank in America with assets of 307 Billion dollars is covertly looking for a buyer.

Read the article here.

The thing that scares me the most is the fear that this may engender in regular investors and bank customers.  If people freak out and go running to get their money a la “It’s a wonderful Life,” we will see a real problem.

Very basically…

Banks only, due to massive deregulation, need to have 10% of their assets in cash.  What that means is that the banks have 90% of their riches tied up in investments that they cannot make liquid.  The worse case scenario is a massive run on the bank.

What we need are solutions and right now I’m hearing not much besides platitudes from McCain (who used to call himself “Mr. De-regulator” and now says that wall street needs regulation) and from Obama I hear a little more actual solutions, but what I want to hear even more is what people should be doing right now.

My advice is nothing.  Keep your money where it is and ride this out.  Shift some of your funds from stocks to bonds possibly if you want a bit more security, but not too much.  Our economy is based on one thing and that is confidence.  We as individuals need to toe the line, and we need leadership that will do the larger scale change that we all have to admit we need.

No runs on banks.  Your money is safe.

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