July 20, 2008

Is Your Money Safe at Intrust Bank?

Is this the scene that Intrust Bank customers will face in the next six to twelve months?

It's a scene unfolding for banking customers across the country and many fear it to be more commonplace as more and more banks are caught in the bursting economic bubble.

A bank run (also known as a run on the bank) is a type of panic which occurs when a large number of customers of a bank withdraw their deposits because they fear it is, or might become, insolvent. Banks retain only a fraction of their deposits as cash: the remainder is invested in securities and loans. No bank, including Intrust Bank, has enough reserves on hand to cope with more than the fraction of deposits being taken out at once. As a result, the bank faces bankruptcy, and will 'call in' the loans it has offered. This can cause the bank's debtors to face bankruptcy themselves, if the loan is invested in a plant or other items that cannot easily be sold.

How much money will it take to bail out the banksters?

The Federal Deposit Insurance Corporation insures each depositor up to $100,000, but beyond that… the depositors lose if the bank fails. The FDIC expects to spend between $4 billion and $8 billion — to bail out IndyMac alone. To perhaps provide some scope to the expected fallout, Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson want to tap the U.S. taxpayer to provide unlimited liquidity to prevent the expected financial collapse.

"It can't happen here," you might say.

Tell that to customers of Countywide Financial who suffered a bank run in Aug., 2007 as a consequence of the subprime mortgage crisis. Or what about the bondholders who witnessed the evaporation of billions of dollars in March 2008, held at the securities and banking firm Bear Stearns. Most recently, IndyMac Bank was seized by federal regulators on July 11th., after customers withdrew amounts averaging $100 million a day from the bank, forcing IndyMac to halt new loan submissions, closing its retail and wholesale lending divisions, and laying off 3,800 employees.

Despite the assurances by FED Chariman Bernanke and Treasury Secretary Paulson, investors around the world are waking up to the realization that the crisis of confidence in the US banking sector is getting worse, not better. Billionaire investment guru George Soros dubbed it "the most serious financial crisis of our lifetime", warning that there could be more big incidents ahead. And not even last week's US Government bail-out of the mortgage giants Fannie Mae and Freddie Mac could quell the panic. As customers lined up to withdraw money from IndyMac recently, two other big American banks were compelled to make public statements that they were financially sound.

The FDIC has gathered a list of 90 banks nearing failure, but have not made that list public, as it would likely cause the very run on the banks they hope to avoid. However, regulators predict that more than 100 banks will go under in the next year or so. Most of them are regional banks that specialized in riskier loans when the housing market was booming.

I don't know about you, but I wouldn't feel comfortable with my money at Intrust Bank, or any bank for that matter… especially if I had more than $100,000 on deposit. It seems to me a much safer place for my money would be in either silver or gold.

Top 10 Ways to Tell If There's a Run on YOUR Bank

10. The expected wait time on the Automated Telephone System is over 8 hours regardless of what time if the day or night you call.

9. The armored truck that comes to the bank every day to drop off cash for customers has parked in the back for the first time ever, has five more armed guards and is taking out the biggest bags you've ever seen.

8. FDIC agents are conducting casual "customer polls" that want more information than an IRS agent.

7. You have perfect credit but no matter how hard you beg they wont issue you a credit card.

6. Intrust Bank starts giving away free box seats or season passes to the Intrust Osama bin Laden Arena (now under construction) for any deposits over $25,000.

5. Sign on the door says "open for deposits only."

4. No pens, no withdrawal tickets.

3. The Bank Teller is sweating as if you walked in while a robbery is in progress and somebody is on the floor behind the counter holding a gun to her cankle.

2. Your bank doesn't even give good toasters to new customers, but the line around the block looks like they're giving away iPhones.

1. Withdrawal sheets are replaced by FDIC I.O.U. Sheets.