There has been bad news about my bank, Washington Mutual, for some time now, and I thought of transferring my humble savings account to another bank but I decided against it. This morning I went over to my branch to see if there was a bank run, but the place was deserted, so I struck up a conversation with a manager, mentioning that Washington Mutual was in the front page headline in our paper, and expressed my hope that Wells Fargo instead of Citibank or the FDIC would take over WAMU. We chatted quite awhile. It happened that he is from San Francisco, where his mom worked for Wells Fargo for twenty-some years before going into the mortgage brokerage business on her own.
"Why do you like Wells Fargo?" he inquired.
"I worked for the bank when I was a teenager in San Francisco, down in the basement. All the opened envelopes were sent down after the mail was removed, to make sure everything was taken out of the envelopes. We ran them through rollers. And we had a side business going, on the stamps that had not been cancelled by the post office. We soaked them off and sold them."
The WAMU manager and I were pleased with ourselves. He got busy with a customer, and I withdrew a few hundred dollars just in case of some sort of transition glitch. If worse comes to worse, I reasoned, I can max out my credit cards and assign my account to the creditors.
A personal trainer at the gym this afternoon said a trader on Wall Street said a huge crash is coming up and anyone who really knows what is going on should withdraw their funds. He said he was taking out $50,000 cash tomorrow - I asked him where he lived, jokingly, but he didn't think I was very funny.
"Heck, that would be a damn fool thing to do," I remarked. "Accounts are insured up to $100,000."
"You don't know what is going on! The insurance company is broke."
"Well, I beg your pardon, as the last time I looked at the FDIC balance sheet, which was not long ago, it had about $50 billion in reserves, the most of it in government paper of various maturies, and some cash."
"It's gone! It's going down the tubes! Look at AIG - it had to get a loan for $85 billion, and it will need even more!"
"Relax. The government will loan the FDIC ample cash, which it can eventually recover from the banks in fees."
"There's not enough cash left after bailing out the rich bastards."
"They will just print some more. No problem."
"I'm taking mine out in the morning. You're going to get screwed, so don't say I didn't warn you."
"What they ought to do," I said, thinking constructively, "if there is a run on the banks, is to just give everybody a U.S. Treasury Debit Card - no credit cards - instead of cash. All exchanges would be handled by the national bank, taxes would be calculated on gross income and deducted...."
"To hell with that! The government bank is already bankrupt. I'm going 100% into hard cash."
"Maybe some gold."
"Gold will just break even over the long run. Look, let me give you some sound financial advice. Buy yourself some real estate at depressed prices. Maybe get that little farm outside of town. Get some canned food too. Also take advantage of the Second Amendment. If the government keeps bailing everyone out, cash will be trash. Otherwise, keep your money in the bank, where it's safe for now. Government insured bank accounts are second only in safety to government paper."
"You don't know what you're talking about," said he, and stomped off.