"There's Something Funny Going On At the Bank, George..."

Above, you will find the cultural touchstone that we all imagine when we think of the term "bank run." George Bailey, handing out his honeymoon stash, as the town of Bedford Falls converges on the Building and Loan.

Below, you will see a much less charming version — as customers raid the collapsing IndyMac bank.

Turns out, the history of bank runs is uniquely American — and more interesting than you'd think. Jane Kamensky fills us in on the bank panics in between these two. Any questions? Post 'em here, or rent It's A Wonderful Life.

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The NCUA is the government agency the covers the Credit Unions

Sent by Rick Melton | 2:59 PM | 7-22-2008

I read a Wall Street Journal column at the top of their front page July 21, 08 (yesterday): 'FDIC Faces Mortgage Mess After 'Running' Faild Bank', with studied interest as it states that the FDIC is now responsible for much of these bad banks operations in allowing bad loans to homeowners such as myself, which caused the foreclosure mess as I lost my home in foreclosure several months ago; the home of 20 years that I designed and built for my first family.

I see that many people had only purchased a home in recent years, and then walked away when they found that their loans superseded the value of the home but try to imagine designing as a life investment, an artfully designed home planned for a life with thousands of dollars of landscaping that I planted myself and maintaining many rare accent shrubbery and trees to only have Washington Mutual Bank advise me wrongly and fraudulently in September 2003 to convert my conventional loan to a sub-prime, adjustable rate to pay interest only to the bank as they indicated that this would save me money while I was unemployed. They ran a no-doc, stated income from several years before to qualify this loan claiming that they were saving me money while I was unemployed.

When the adjustable rate at interest only, not really a low rate after all, increased payments exorbitantly within months and they would not allow me any more than $10,000 of my potential $100,000 in equity to borrow, I could no longer make payments, I tried to call and negotiate with the bank. No one would talk to me. After being a customer of Washington Mutual Bank for over 20 years, I got cold shoulder and the same disconnected phone calls. Even in person at the bank, they only informed me to call a long distance number across the country at their foreclosure department that never returned my calls. Within a year, even with my attempts to file Bankruptcy Chapter 13, the bankruptcy court failed to keep a motion to stay in effect, the bank ran their foreclosure sale while I and bankruptcy judges thought I was protected by Chapter 13. The bank then proceeded to evict me, rendering me homeless.

Much of the neighborhood was further disappointed when the bank allowed my former home to sit empty for several months as they allowed the grass to overgrow to knee-high, the cleaning crew damaged the garage door and burned my fireplace and glass screen, charring it and melting the metal doors. I had maintained the home, including the fireplace to like-new perfection for nearly 20 years. My home was also my art studio and place of astronomy work for my major interest in life as there are dark skies there 25 miles out of Portland (see site listed below.)

The bank sold my home for $50,000 under its true market value of $250,000 and the new owners (renters?) have hacked up and torn out much of my artful landscaping. The beautiful artfully designed landscaping is now ruined. The new owners cut down half of my $10,000 valued Japanese maple as the front entryway centerpiece garden.

I am in a very slow legal case to recoup possibly some of my $100,000 in equity with the supposed help of a legal aid attorney. If I had sold in time I would not be penniless now but my attorney tells me that the bank wants more money to recover from me?! After the trustees deed of sale, there is a $125,000 surplus hanging in the trustees attorneys office in LA. It is undecided as to what becomes of these funds as an inter-pleader hearing is now scheduled. I believe that these funds are due to me, but the bank wants it all and more from me. What can be done? It feels like a nightmare that I cannot wake up from. Since then the WAMU banks have been bailed out (bought out?) for 7 billion! What about their customers lost homes, which are now rendered homeless? Where did over $100,000 in equity go?

I will look forward to any advice from you as my attorney hasn't any good news for me currently, as a homeless person now at near retirement age.

Mark
Portland, OR

Sent by Mark Seibold | 3:14 PM | 7-22-2008

Jane Komensky's analysis can't compare with that of Joseph Salerno: http://media.lewrockwell.com/LRC-002-The_Banks_Are_Broken.mp3

Sent by Clayton Ulrey | 4:00 PM | 7-22-2008

Following Rick's post above:
My Credit Union sent out a media release.
It says, dated July 14 this year, "Fed Insurance Protection Strong at Mid-Year."
Two questions for anyone:
One - why "strong" and not "guaranteed?
Two - what is the real life dif between NCUA, FDIC, and NCUSIF -- already know that tax dollars back up FDIC and Credit Unions purchase their own insurance. So, what does THAT difference come to in our real lives...these days?
Thank you.
Kathryn in
Pleasanton, Ca

Sent by kathryn | 4:24 PM | 7-22-2008

I am fascinated by the fact that Jane Kamensky completely dodged the questions about Credit Unions vs. Banks when it comes to safety and how they are set up. See Kathryn's post above. For all the talk about Banks on this program, why does it seem that the real, practical questions that people have are not being answered?

Sent by Mary | 3:24 PM | 7-23-2008

It's embarrassing that Dr. Kamensky demonstrated no knowledge whatsoever of credit unions.

Credit Unions can also fail, of course, but they are structured differently than banks.

To respond to Kathryn's comments in part--
Most credit unions are insured by the National Credit Union Administration (NCUA) through the NCUA's National Credit Union Share Insurance Fund (NCUSIF). In addition to providing deposit insurance, the NCUA is also a regulator of federally-chartered credit unions.

Most banks and thrifts are insured by the Federal Deposit Insurance Corporation (FDIC) through the Deposit Insurance Fund.

Sent by John | 5:29 PM | 7-27-2008

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