Could the banks save themselves and the economy from runs by offering any customer a full-service, no fee, option to use old-fashioned paper passbooks for all account activity for as long as desired, no extra fee (though the inconvenience of loss of ATM use for the duration of passbook option) ? What say the experts here ? Sure, I know it would cost the banks a lot, but not every customer would take 'em up on it, and would it create confidence ?

-- Blue Himalayan (bh@k2.y), April 07, 1999

Answers

Ok---you be the first to say, no cash please, I'll take a paperbook instead...confidence maybe for some, but not for me thanks...I took the cash last month---frankly I think banks coming forth with that type of confidence ploy could back fire as it would draw attention to "why are they doing this?"--and than folks smell a rat and run faster to withdraw than had they not...one persons input..thanks for asking

billyboy

-- billy (billyboy@nowhere.com), April 07, 1999.

I don't understand how a savings account passbook would change anything. Your bank will not "believe" your passbook information if its own account information is scrambled.

The problem is not only that your bank may foul up your account information. It may also not have enough cash to satisfy its depositors' desire to withdraw same.

-- Robert Sturgeon (rsturgeon@calwest.net), April 07, 1999.

Talk about instilling depositor confidence...After a recent minor error occurred in my checking account, I contacted my bank to ask if the problem was y2k-related. They denied that it was, and assured me that I had nothing to be concerned about since my deposits were insured by FDIC. I then asked what would happen if my account was lost or corrupted during the transition; how would I get my money? After some hemming and hawing, the rep said that I would probably have to prove, to the bank's satisfaction, the status of my account prior to the rollover. Until that was accomplished, I would not have access to my funds. In fairness to the rep, I suspect she hadn't been asked that question previously, nor had she been trained in how to respond to it. BUT: Have you ever tried to straighten-out an error in any database maintained by a large institution, whether governmental, financial, or something else? Even in the best of times, it's often quite confusing, time-consuming, frustrating, and difficult to get past the institutionalized indifference, inertia, and even stupidity. Imagine what it might be like to face this problem during the chaos of serious y2k disruptions, when numerous desperate people might be clamoring for resolution. This is why I intend to remove my funds from the bank for the duration.

-- Norm Harrold (nharrold@tymewyse.com), April 07, 1999.

Billyboy - I agree with your "it would draw attention to "why are they doing this?"--and than folks smell a rat and run faster to withdraw than had they not." To paraphrase a line from an Ayn Rand novel, 'if you want to reassure me, stop reassuring me so much'.

Blue Kittycat - How old are you? Have you ever used a passbook? I'm a relic, so I have. Several problems with the passbook idea. 1 - They don't have the time to institute it, train tellers, buy/build the stamping machines, etc. 2 - What Billyboy said. 3 - (the biggie) A passbook system works on CASH. Sorry, no checks unless you want cashiers checks. So we're right back at square one, not enough cash, though I do think that that Billyboy is right on the money (no pun intended) on this.

Robert - All of the info in the passbook is done by their recording/accounting machine (mechanical) so it would be reliable, but see #1 above.

Norm - You are so right on this. The risk/reward that the banks are offering just isn't enough. Maybe if they offered 10% per month?? The two polls http://cnn.com/US/9901/10/y2k.poll/index.html and http://www.sciencedaily.com/releases/1999/01/990108080346.htm confirm that Americans agree with you. This is way more depositors than are needed (if we can beleive the polls indicate future behavior, ie. if people are going to do what they SAY they are going to do) to destroy the banking system. If a typical bank loses 3-10% of it's deposits, it becomes insolvent.

Perhaps we should start a betting pool here? Everybody can guess when the first cash withdraw restrictions will start. Personally I have no idea. During 1999 I'm going to be treating keeping money in the bank like hang gliding, don't go higher than you mind falling.

-- Ken Seger (kenseger@earthlink.net), April 08, 1999.

Norm

Your post brought to mind a question I have about Treasury Bills. The conventional wisdom is that T-Bills are about the safest haven for funds, but I wonder......If the Gov't is in as bad shape as reported, how will we PROVE ownership and balances of T-Bills if the data is messed up? It is no longer possible to physically hold the Bills....so all we have is "statements".

What is one to do?

-- Sheila (sross@bconnex.net), April 08, 1999.

Sheila - Perhaps this will help

FRANC IOS I D G IMP AVSTR REX BOH GAL ILL ETC ET AP REX HVNG and a picture of some guy with a beard. Then on the back side there is C CORONA MDCCCCXV and below that 100 COR 1915 and there is this silly picture of a bird with its wings all stretched out and fluffed up, and get this, its got two heads! and IT is wearing some sort shield on its breast, its got two tails to boot. Rediculous! And then on the edge it says V N I T I S then a fish and star and fish, then another fish star fish, then V I R I B V S followed by another fish star fish and fish star fish. Heck I can't even pronounce vnitis or viribvs much less translate em'.

-- Ken Seger (kenseger@earthlink.net), April 08, 1999.

I understand that bank passbook entries are done by machine. But I guarantee you that the teller will not give you cash if the bank's computer is down, regardless of what your passbook says you have. The passbook is a "feel good" leftover from the good ol' days. Your money is not in your passbook, it is in the bank's computer.

If you have serious doubts about your bank's ability to pay you cash anytime in the future, your best bet is to convert some of your account balance from bytes into Federal Reserve Notes. As of now, all you're losing is a tiny bit of interest and the safety of the bank. You can ignore the interest- it is too low to worry about. Which is safer, your bank's computer or the place you hide your cash? THAT is the question you should concentrate on.

-- Robert Sturgeon (rsturgeon@calwest.net), April 08, 1999.

Robert - "But I guarantee you that the teller will not give you cash if the bank's computer is down, regardless of what your passbook says you have." Good point! What's that line from some movie? "Well what are you going to believe? Me or your lying eyes?"

Also, your "convert some of your account balance from bytes into Federal Reserve Notes" is right on. If people would go into the bank and say, "I don't want to withdraw anything, I just want to look at my money." and the teller then held up a tape back up cartridge or a CD-R , I think more people would understand exactly how banks work.

-- Ken Seger (kenseger@earthlink.net), April 08, 1999.

I think if runs start before the computers go down (i.e. in 1999), the Feds'll outlaw cash completely and mandate electronic payments only. There'll be an unopposable public outcry for this - when the eight respondents to this thread have their dough, while everybody else has the bank door slammed in their faces. Then the Fed Reserve notes'll be bum wipe and bird cage lining.

-- Blue Himalayan (bh@k2.y), April 08, 1999.

Blue Himalayan- Your concerns are well taken. The government is not bound by the decent considerations ordinary people obey. But outlawing cash is a concept more easily suggested than accomplished. I'm sure the most "they" could do would be to outlaw the existing currency in favor of a new currency. This is a good reason to hold a little gold and/or silver coinage in addition to currency. You just never know what those crazy bassturds :-) in the government will do next.

-- Robert Sturgeon (rsturgeon@calwest.net), April 08, 1999.

You got my point alright, Sheila. It's my understanding that the burden of proof will be on the depositor, not on the bank; and until the depositor satisfies the bank, he/she will NOT get access to the money. So that attempt to assuage us with promises of FDIC insurance seems rather empty and worthless, perhaps even hypocritical or deceptive. That FDIC insurance won't rebuild a corrupted account record. I have very little money; the bank will never notice it's gone...but I simply can't take the chance of it being "lost".

-- Norm Harrold (nharrold@tymewyse.com), April 08, 1999.

New form of currency, that's interesting. Related to that of course, there's always the "watch out what you pray for" option: give 'em their cash, alright, but in huge, discouraging, useless bills ($500, $1000).

-- Blue Himalayan (bh@k2.y), April 08, 1999.