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A Slow-Motion Bank Run In Europe

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A Slow-Motion Bank Run In Europe


A Slow-Motion Bank Run In Europe

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The movie "It's a Wonderful Life" includes the following scene: Jimmy Stewart, playing the manager of a savings and loan, is trying to get out of town for his honeymoon when he sees people racing down the street.


UNIDENTIFIED MAN: (as character) Don't look now, but there's something funny going on over there at the bank.

MAN: (as character) You got any money in the bank, you'd better hurry.

INSKEEP: It's a run on the bank, people scrambling to withdraw money. A panic is not always that dramatic. And, in fact, in recent months, a slow-motion invisible bank run has been underway at big European banks. Here's Jacob Goldstein from our Planet Money team.

JACOB GOLDSTEIN: Who's causing this slow-motion bank run? In a way, it's us. In your retirement account, you probably have some money in stocks, some in bonds and some in cash. That money in cash, it's not actually a bunch of bills sitting in a vault somewhere. It's probably invested in what's called a money market fund. This is where the invisible run is happening. David Glocke is a money market manager at Vanguard, where he manages $130 billion.

DAVID GLOCKE: You know, money market managers, we kind of have a bunker mentality. You know, we're not looking to take risk. We're trying to hide from it.

GOLDSTEIN: For a long time, part of the way Glocke hid from risk was by making loans to big, safe European banks. But these days, the banks don't seem as safe as they used to. Those big European banks, and especially big French banks, have loaned lots of money to Greece and to other troubled European countries. This makes people like David Glocke nervous. If Greece doesn't repay the French banks, the French banks may not be able to repay David Glocke. How much do you have invested in French banks right now?


GOLDSTEIN: The French banks say people like David Glocke have nothing to worry about, but in the past few months, lots of other U.S. money market funds and other big institutional lenders have yanked hundreds of billions of dollars out of European banks. This slow-motion invisible bank run has not yet turned into a full-blown panic, but it is worrying enough that just yesterday, the European Central Bank and other central banks from around the world stepped in. They told the European banks if the David Glockes of the world won't lend you the money, we will. This program is scheduled to run for about six months, so it should buy some time for European banks. That could be enough, but only if Europe puts together a plan to bail out Greece and the other troubled European countries, and only if investors like David Glocke at Vanguard actually think the plan will work.

GLOCKE: I expect at some point when conditions have improved in Europe, that we'll begin to invest in those banks again.

GOLDSTEIN: Do you think six months is enough time? Do you think they'll have their act together in six months?

GLOCKE: I certainly hope so.

GOLDSTEIN: But if Europe doesn't resolve the debt crisis, this slow-motion bank run is likely to continue. And one key thing about bank runs: They tend to feed on themselves. So, what starts out in slow-motion can turn into a full-speed crisis. For NPR News, I'm Jacob Goldstein.

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