Why I think banks are going to go down

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

This week I have come to the conclusion that the banks are going to go down. Reasons:

1. From what I read, they aren't ready and we may lose the grid through embedded chips.

2. Three men where my husband works have gone to the bank and withdrawn all their money. They were all 3 'sorta' GIs. One was getting more than the others because he is insulin dependent and had rightfully become concerned on how to acquire enuff and then to keep it cool here in Florida. But guys talk (I know that comes as a shock to most of you fellows). The diabetic became interested and I began sending him forum info. On Monday he went to the bank and withdrew a sizable amount of money ($22000) and left the same in his savings acct. He talked on tuesday about the hassle the tellers had given him, thus two other sort GIs decided that there must be something to this and they went on Wednesday and pulled out their savings. On Thursday, they all compared stories of the sh-- that was dealt out by their bankers (one was invited into the manager;s office) resulting in the diabetic going back on Friday and closing out his account thus taking out another $22000. I have no idea how much money the other two guys got but do know they had to sign the "over $10K" statement. So....all of this scenario took place at the local landfill. What will next week bring? Each one of those men will tell someone else and they will tell someone else, and so it goes. I have always thought that the bankers were protesting too much, thus tipping their possibly empty hands. Its backfiring on them. Whenever someone tells me that their "banker said everything was fine" I ask them who is going to lose their jobs if the banks close?

-- Taz (Tassi123@aol.com), December 11, 1999



Not sure I agree with your point #2. The banks and the Federal Reserve are obviously monitoring the cash-withdrawal situation closely -- and if they can keep things afloat until Christmas, then their problem is effectively solved WITHOUT destroying the economy during the critical Christmas shopping season (critical, that is, to the retailers who depend on this season for up to 50% of their annual profits).

If cash withdrawals begin to accelerate during the final week, between Xmas and New Years, our friendly government can simply declare a bank holiday -- or implement a limit of $100 per day on cash withdrawals. The population will complain, but it's a pretty quiet week anyway; I suspect everyone will just stay home and grumble -- or they'll go down to the grocery store and buy a bunch of food with their credit cards.

Seems to me that the big risk to the banks is the possibility of massive loan defaults from creditors that were judged creditworthy when the loans were made (as opposed to the loans to third-world countries that were dubious even in the best of times), but who are bankrupted by their own Y2K problems.

But even here, it's not immediately obvious that it would case the banking systems to go down. Look at Japan: the government has kept most of the banks afloat despite the monumental losses caused by bad real-estate loans during the Japanese "bubble economy" of the 1980s.

I'm certainly not trying to suggest that Y2K will be a BITR, or that the banks will escape the impact of Y2K altogether. I just think we need to be cautious before we accept the rather profound conclusion that the entire banking system is going down...


-- Ed Yourdon (ed@yourdon.com), December 11, 1999.

Let's do a little math. I'm sure some where I've gone through this on this forum the old "if A deposits $100, of which $95 is loaned to B to buy from C who deposits the $95, of which $90.25 is loaned to D who buys from E who deposits $90.25, et cetra. Okay if you do this only 13 times to get down to about $50 loan, that's over $1,000 *poofed* into existance via the "magic" of fractional reserve banking and fiat money.

The above three guys, let's take minimums only $22K + $10K + $10K = $42K. The multiplier works in reverse too. That $42,000 withdraw into cash impairs banks ability to provide $420,000 in loans, and remmber we only went out 13 times. In total it is much more than that. Please note that A & B, C & D, et cetra can all be in seperate banks so that $420,000 impairment is spread through the banking system, that individual bank is impaired only $39,900 of loans.

Please note if those guys all go out and buy food, gensets, a farm etc. with all of that money and their sellers deposit the money in the bank of Podunk, none of this happens to the system, just to that one bank which is balanced by $39,900 of new loan ability by the bank of Pudunk. It is only if they pull the cash out and keep it as cash that the entire system suffers the $420,000 drag down.

-- Ken Seger (kenseger@earthlink.net), December 11, 1999.

This is exactly why I tell everyone I know to buy as much stock in PERT shampoo as they can. Everyone who uses it will tell 2 friends, and those two friends will tell two friends, and so it goes.

-- Butt Nugget (catsbutt@umailme.com), December 11, 1999.

I'd like to direct your attention to this article in a recent issue of The NY Post. The theme is that the Federal Reserve is paranoid about Y2K... that it's increase in interest rates while simultaneously expanding the money supply will lead to economic problems in the future. http://www.nypost.com/business/18993.htm


-- walt (longyear@shentel.net), December 11, 1999.

Dear Ed: Pardon my overworked analogy, but wasn't that infamous iceberg more or less literally only a BITR? That is, if I remember correctly, the initial scrape scrape scrape of berg vs. Titanic was barely noticed by the happy campers. There are bumps in the road, and then there are bumps in the road that cause large wrecks in large machines, yes? Merak

-- merak (merak@kachina.net), December 11, 1999.

Just curious but why am I getting at least 2 credit card offers per day in the mail? Couldn't be Christmas at this point, because they couldn't even get the cards to me prior to the end of the shopping season. Plenty of 0%, 2% and 3% interest. Just can't figure how all this is tying in together. They're also getting quite clever on the disclosure section with their wording, I'd read over real carefully what they're laying down as terms.

-- claurann (claurann@aol.com), December 11, 1999.

Let us not forget the other letter, group W. They're the ones who get paid but DON'T deposit the money back into the banking system, they just cash the checks & stash the cash.

-- Arewyn (isitthatlate@lready.com), December 11, 1999.

I believe that thru bank holidays or limits on cash withdrawels they can keep the system up UNTIL the oil is cut off or cut back. Without oil there are no jobs, without jobs there are no paydays, without paydays there are no mortgage payments, without mortgage payments it all falls down. Keep you eye on oil.

-- goldbug (goldbug@mint.com), December 11, 1999.

Ps. Group W has also been known to play with the pencils on the bench.

-- Arewyn (isitthatlate@lready.com), December 11, 1999.


-- greenspanfan (banks@willbe.fine), December 11, 1999.

I was out to dinner last night with one sort of GI couple and three other newly GI couples. I say newly GI because they just 'Got It' YESTERDAY! The report about water/waste readiness convinced them that there really is something to all the articles I had been giving them over the past year. Until that report they were in denial and thought it was all being taken care of. Two of the three couples plan on withdrawing VERY LARGE amounts of money next week. Their bankers are going to shit blue golf balls when they hear how much they want to take out in CASH.

The next few weeks are going to be a VERY interesting....


-- TECH32 (TECH32@NOMAIL.COM), December 11, 1999.

TECH 32,

You wrote: "I say newly GI because they just 'Got It' YESTERDAY! The report about water/waste readiness convinced them that there really is something to all the articles I had been giving them over the past year."

When I read the Jan.1,1999 article in the Chicago Tribune, it was the water issue that sent me running to find more information. I was prepping within a couple of days.

When I saw those reports yesterday I suspected it would trigger a new group of people preparing (how large a group is anyones guess..)

A new group of people that may not choose to keep their money in the banks...yikes...

-- Deborah (infowars@yahoo.com), December 11, 1999.


I've been on this forum since June and you're what Arewyn refers to as the "W" folks. You haven't had faith in the banks staying up ALL this time and NOW you're using some anecdotal evidence as why you think the banks will go down?

-- Anita (notgiving@anymore.com), December 11, 1999.


One thing I forgot to mention was that they really smelled something wrong with banking when CNN tagged on that little bit about home owners policies only covering $200 of cash losses in the event of a robbery. Cash has nothing to do with water/waste and the fact that it was 'covered' as part of the same story made them feel that someone (the banks) were definitely trying to put one over on them. Looks like all that banking spin is starting to backfire.

Oh! When the possibility of banks closing because people were taking out too much cash came up I said "Well, hasn't the Fed been saying that they have more than enough cash on hand to cover any depositor withdawls? Don't worry about it." with a Big Evil Grin on my face. They knew immediatly what I meant.


-- TECH32 (TECH32@NOMAIL.COM), December 11, 1999.

This is one tough issue.

We all know by this time that if even 10-15% of all banking deposits are withdrawn, the entire system would be in very serious trouble, if not outright collapse. Make no mistake, if that happens, we all lose.

Whether or not you have philosophical differences with our current banking model is irrelevant because, regardless of your leanings, here we are. We have to deal with today's situation today.

I would think that even those people who believe our banking model is fundamentally flawed would agree that it is never a good idea to tear down a load-bearing wall in the house you live in until you've got a new wall built and ready - or at least a temporary support structure.

Some people are very skeptical of the banking industry's claim of readiness. I too have my doubts. But where I think we differ is on the 'all or nothing' outcome of the consequences of 'non-readiness'. Do I believe that some banks here in the US could fail as a direct result of Y2K-related problems? Yes, I do. But I also envision a range of outcomes for individual corporations that fall many places between minor inconveniences and much more serious problems.

If there is massive bank failure, the FDIC will be less than worthless - it was only ever intended to deal with isolated failures, not widespeard/systemic ones. Why less than worthless? Because people have been led to believe, that no matter what happens, their money is protected by the FDIC. This is a dangerous myth and one that needs to be put out to pasture. If a situation arises whereby the FDIC cannot adequetly respond, those impacted will be (justifiably) angry. That anger will only make things worse. So the "FDIC protects you" argument holds little water for me. The recent argument that "we only want to protect the interest you earn" is at best, laughable.

That being said, the FDIC is well positioned to handle isolated failures - those that would occur if just a few banks were in such bad shape that they went belly-up.

But ask yourself which is the lesser of the two evils: Everyone taking all our money out of the bank which ensures immediate collapse or facing the computer problems that actually do arise when they occur (yes, FOF) and being prepared to be patient while people and organizations are given an opportunity to respond?

Like it or not, we all have a vested interest in seeing the banking industry come through Y2K, if not unscathed, then at least mostly intact. Our lives, jobs and income directly depend on this.

For these reasons, I have not advocated people pulling all of their money out of the banking system. At this 11th hour, such action is simply self-defeating on a massive scale.

I have, though, advocated preparedness and increasing the fault-tolerance of your technological dependencies. I have advocated reduction of debt. I have not advocated tearing down the banking system. My position with respect these issues has not changed.

But the banking industry clearly must share the blame for the situation we now find ourselves in. With questionable monetary practices, some bad management, they have painted themselves into a corner and us along with them - with precious little room to manuever. This is one example of what I was talking about when I wrote about the erosion of the middle ground. The entire financial industry is based, to a large extent, upon confidence. That confidence is now about to be tested.

If this confidence begins to erode, will the government step in? Of course they will. But because of the late hour and the innumerable "we're OK, you're OK, everthing's OK" pronouncements, any government action will likely be of little consequence and could easily be, like taking all of our money out of the bank, self-defeating.

Banking is an absolutely critical load-bearing wall in our society. That's why it was identified early on as one of the "iron triangle" along with power and telecommunications. For the record, I support continued operation of our current banking system until such time as desired changes can be implemented without severely damaging our lives and livelyhoods.

But banking is the one pillar of the 'iron triangle' that is extremely vulnerable to perceptions. Both power and telecommunications are, to a great extent, based upon performance. After all, I'm very unlikely to have my electricity or my telephone disconnected because I felt there might be problems with those systems. If they keep delivering service (and I keep my job) then I keep paying the bill. But banking and finance aren't quite so lucky.

Those are my thoughts. You'll have to decide for yourself what makes the most sense for you, your family, your community and our society in general.

-- Arnie Rimmer (Arnie_Rimmer@usa.net), December 11, 1999.

Perhaps my terminology is wrong. When I said "down", I didn't really mean total collapse. But if the bank will only allow me $100, or if they declare a bank holiday...if I cannot get to my money, then the bank is "down". I can only speak for myself. But I can tell you between 3 of us in my family we have removed over 3/4 million dollar from the bank's cash. We did this in July of 1998 when even the bank tellers didn't know what y2k meant. So are we "hoarders"? I don't think so. And I can tell you that not one dime of that money has gone back into circulation. In the meantime, all that goes into the bank acc't is my SS check. Hubby's pay checks get cashed. We are very fortunate in that we can pay the bills with just my SS check and have been using hubby's for preps and putting away more cash. Will we put it back into the banks and the stock mkt when the dust settles? You bet! But until then, its OUR money. We worked hard all of our lives, and we invested and saved, and did without all the new toys that others had. We ALWAYS paid cash for everything. If we needed a new car, we got one....after we had saved the money for it. We have positioned ourselves well, but we did it through work and lots of thought and sacrifice and not LUCK! We are not gamblers in nature and we are not going to let the banks or the stock mkt gamble with our money during this very trying time. If you feel the banks are safe, by all means, leave your money in the bank! You, and only you, have the right to make that decision...its your money. And yes, the comment about I have never trusted the banks has some merit. I have never trusted the banks since I started reading about y2k in late 1997. I don't trust the stock mkt or the brokers either. I don't trust the gov't and I don't trust the computers. When the chips fall, be it y2k or any other major disaster, you will be on your own. We have paid our dues and we have the right to prepare ourselves as we see fit. And so do you.


-- Taz (Tassi123@aol.com), December 11, 1999.

Went to the bank yesterday to cash a check. I deposited only enough to cover my mortgage. The teller had to get authorization to release the remainder of the money to me. The manager knows me and always smiles and waves at me when I come in. Not yesterday though, she wasn't happy that I was putting in less and getting more back. I've been doing this now for almost 2 years and never had a problem until yesterday. The teller tried to pass off a bunch of $100's and 50's but I got what I wanted, $20's -10's and 5's. Oh, and they had big signs everywhere "We're Y2K Ready!"

-- ~~~~ (~~~@~~~.xcom), December 11, 1999.

Biggest overall problem is international banking....top 3 on foreign exchange markets are Londen stock exchange, New York stock exchange and Toyko stock exhange...they trade over $1 TRILLION dollars on a daily basis.....Japan is not compliant. This may cause problems...

-- mmmm (mmmm@mmmm.com), December 11, 1999.


Maybe if the government had been a little more honest with the public regarding possible Y2K failures, and said "it might be prudent to keep two weeks, or maybe a months worth of cash on hand" a year ago, people might have had the opportunity to draw it out and save it gradually, over a years time.

Instead, they decided that they were going for this 3-day storm bullshit, no matter what. I firmly believe this was decided a year ago, at least. They are terrified of panic, and that is exactly what they may have created.

Eventually even the dumbest male teenager in the world is going to discover girls, and when he does, watch out......he will want to do as much discovering as possible in a very short time. Possibly not the best analogy, but I think you get my point.

TPTB took a gamble that the sheeple would remain sheeple right up until the end. Now, I hope that for the most part they do now, or it will be a self-fulfilling prophecy for sure.

I hate to have to say it, but it would be better for us now if everyone left there money in the bank. It's getting awfully late for a rush at this point.

-- (cavscout@fix.net), December 11, 1999.

Given the mindless complacency of the American public and the lack of independent thinking, due to far too much television and a severely dumbed-down public school system, I do not think there will be any panic or rush to cash by 95% of the people in the country. In other words, I do not accept the myth that the greatest danger from Y2K is public perception rather than the objective reality of bad code.

Therefore, the only prudent thing to do is to convert as many assets as possible into cash and gold coins and wait to see what's going to happen. Doing nothing is stupid.

-- cody (cody@y2ksurvive.com), December 11, 1999.


"I have not advocated people pulling all of their money out of the banking system."...unfortunately even a large number of people taking a "little extra" out will cripple the system.

You do raise an important issue about our "responsibility as citizens" (if you will), to sacrifice on behalf of the good of society. Do we sacrifice and risk individual loss, or look to our self-interest and facilitate collective loss? Good question!

This situation is not unlike the problem faced by many farmers every year. Individually, every farmer knows that in order to make a profit, he has to work toward attaining the biggest crop he can raise. This thinking collectively leads to ever increasing national grain supplies; eventually resulting in lower grain prices. The individual farmer's desire to make a profit works against him in the long run...but how can you blame him...he either continues to exercise self-interest by raising more and more grain every year, or he bails out of the system.

I understand that the analogy is somewhat imperfect, but I think it gives a reasonable idea about how the bank customer feels. When faced with this dilema does he risk losing his money by leaving it in the bank, or does he pull it out thereby helping create the scenario he hopes to avoid.

It's a Catch-22 situation in either example. I guess what we're really hoping for is a George Bailey to show up and convince a majority of us to keep our money in the bank...just between those of us on this board, I've yet to see a banker with George Bailey's character, (i.e. a man trustworthy enough to believe in).

-- TM (mercier7@pdnt.com), December 11, 1999.


I understand what you're saying and I agree banks going under would be a BAD THING. But the truth is it's MY money. I already paid my taxes on it and if I feel better having cash, then that's what I want. That's what I'm ENTITLED to.

I didn't create this system and I sure didn't create the problem of not having enough cash printed up beforehand. There was not a thing in the world preventing the Fed from having trillions, not billions, but trillions of dollars in physical cash sitting around in some warehouse for the last 20 years in the event something like this happened.

If the banking system fails, it won't be the fault of the people taking out THEIR money. It does belong to them after all. It will be the fault of the government for failing to prepare for such an event in the first place. And We The People will know it.


-- TECH32 (TECH32@NOMAIL.COM), December 11, 1999.

If the systems fraudulant and only exists to make more money for the rich then let it crash and perhaps we can make a better mousetrap from the pieces.

-- zoobie (zoobiezoob@yahoo.com), December 11, 1999.

It is truly sad that we have come to thi point. We have lived large as a country for so long that REAL money doesn't even exist anymore with regard to the Government. Who's cash are they spending now? My 4 year old's? Or is it his Grandchildren's? Fractional Reserve Banking has only delayed the inevitible. This house of cards will fall, be it Y2K (Which I believe will play a significant role) or some other unforseen circumstance that will enter the picture. Anything out of the projected ordinary will strain the foundation which is built out of straw.

P.S. I am truly grateful for all the information and insight provided by this site. Thank you

-- Carl (no3daystorm@hotmail.com), December 11, 1999.

Taz: BEWARE If we don't have a meltdown and you go to deposit back into the system tens, hundreds, of thousands of dollars, the banks will conveniently forget that it is your money you previously withdrew which you are putting back in. You will have to go through a tremendous bunch of red tape to "prove" that you got the cash legitimately and that you are not a "money launderer". If we are talking more than $10,000, you need to do some research on this subject. Otherwise, YOU COULD BE BOTH OUT YOUR CASH, AND IN JAIL". Sieg heil, Amerika!

-- A (A@AisA.com), December 11, 1999.

A starting point for your asset protection research would be

-- A (A@AisA.com), December 11, 1999.

No problemmo...99% came from Edward Jones and our investments with them. Have all the records. Signed all the papers at the bank for the IRS. Paid all of our capital gains taxes. This was all done in 1998 when even the bankers were still saying Y2Who? Because it was a large sum of money it was ordered ahead of time and came right out of and still wrapped in FRB paper. There were/are no secrets. Don't worry, our tax attorney was on top of it all. After all, he was getting his out at the same time!!!!!!


-- Taz (Tassi123@aol.com), December 11, 1999.

Arnie, I take clear exception to most of what you say. Let's start with, "Whether or not you have philosophical differences with our current banking model is irrelevant because, regardless of your leanings, here we are. We have to deal with today's situation today."

Well, duh. No arguement there, however....

"I would think that even those people who believe our banking model is fundamentally flawed would agree that it is never a good idea to tear down a load-bearing wall in the house you live in until you've got a new wall built and ready - or at least a temporary support structure."

My philosophical difference makes me look at what you percieve as a sturdy load bearing wall and I percieve that it as a terminte riddled, 1/4 dry rot pathetic excuse for carpentry in the first place that is about to collapse. See Long Term Capital Management for details! Now with that in mind, let's look at "whose money is it anyway?" The contract between me and the bank is that I give them money and they keep it for me? That's what the perception is, heh heh. Well they're not hold up their end of the stick are they? Am I supposed to keep up my monthly payments on a pig in a poke, meow? Ah but Ken, think of society, and of course the little children. Okay, the constitution is the basic law of the land, or used to be. What does it say about money? Oops, the federal government ain't holdin up its end of the stick either. So here I have two thieves that are complaining about me not puting bigger pies on the windowsill so they don't have to steal into my back yard as often to steal pie.

Of course all this kind of avoids the entire discusion of what is money, kind of like ignoring a diarhetic elephant in a carpeted living room. Money is usually attributed to have 3 or four fundamental characteristics. Let's see, money is a medium of exchange, no problem, with legal tender laws and the fact that we have enough club wielding gun toting "muscle" to make sure people toe that line. Money is a storehouse of value [insert wild laughter here].

Thanks Arnie, I needed a good laugh.

-- Ken Seger (kenseger@earthlink.net), December 11, 1999.

Zoobie, brevity is the soul of wit. In your case it is also the soul of clarity. Well said.

-- Ken Seger (kenseger@earthlink.net), December 11, 1999.

Sorry, Arnie, I have no confidence in their game anymore. They'll have to play without me. There's so much double-speak and BS floating around now that I have to keep my water-wings on all the time now. Facts are in short supply, and most are wearing deoderant. I must protect myself and my family, and DAMN The Federal Reserve.


-- Pinkrock (aphotonboy@aol.com), December 11, 1999.

Ken, uh, sorry, you misunderstood the compact. The deal is that you give us your money FOR an INTEREST PAYMENT, and WE promise to use it wisely, in earning that interest payment. This has always been the compact and has always been explained (albeit VERY abysmally poorly) to people in th edsisclosures from the banks.

I understood this when I set up my first (solo) bank account in 1968. Things haven't changed.


-- Chuck, a night driver (rienzoo@en.com), December 11, 1999.

Yeah Zoobie, I've thought a lot about all this too. I would bet at this point, that even if one could retain a large quantity of cash, if there still is a U.S. Government, they will "change" the currency so as to make what you have worthless.

Lot's of cash in a total collapse, might be good for a while. Buying what you need etc., but sooner or later, someone will realize where all the cash is coming from, and how would you gaurd it?

If I had 500,000 and others had relatively little, wouldn't they just come take mine? Or, eventually, all your cash would be in circulation in the "tribal community", and you'd better have figured out something you can do or produce to trade with your fellow survivors (or be totally self-sufficient), because you'll be out of cash.

-- Gregg (g.abbott@starting-point.com), December 11, 1999.

Thanks to all for the responses. You've given me some things to chew on.

Unquestionably, the money you put into the bank belongs to you and no one else. And just so there's no doubt, it is your right to do as you choose with your money. Period. Any discussion of this issue must begin with this premise.

I also agree that some of the criticisms leveled at our banking 'system' are justified.

But the real question as we move forward over the next several months is whether we abandon ship, yelling 'every man for themselves' or attempt to choose another, less potentially dangerous path?

Would I like to see change? Yes, clearly. But I do not want to see that change come in a way that is severely disrupting. I do not want to see thousands out of work and lives destroyed.

I don't claim to have the answers. Most days I'm hard pressed just to find the answers I need for my life. But a collapse of the current banking system would not be on my 'most preferred solutions' list. It has been argued by some that such a collapse is inevitable - that banking's ultimate fate was ordained long ago.

That may or may not be true, I really don't know. But considering the pain an event such as this would cause, I sure wouldn't be in too big of a hurry to get there.

Mom always said that I had to play the hand that were dealt to me. Thanks again, additional comments appreciated.

-- Arnie Rimmer (Arnie_Rimmer@usa.net), December 12, 1999.

Erratum: " hand that were dealt to me should have read "hand that was dealt to me"

-- Arnie Rimmer (Arnie_Rimmer@usa.net), December 12, 1999.

Amazing the info and opinions that come out when you poke someone with a sharp stick. Thanks Guys...a really interesting thread. Personally I feel the system is going to come down with or without my money. Its corrupt and it needs to come down. If it doesn't it will just mean that much more suffering in the future. The FRB is a private enterprise controlling the money/banks/economy of the strongest nation on earth. Go figure!! Taz

-- Taz (Tassi123@aol.com), December 12, 1999.

Don't keep all your egg's in any one basket.

-- Gambler (scotanna@arosnet.com), December 12, 1999.

Chuck -- that doesn't apply to plain checking accounts. Interest paying checking accounts and combo checking/savings do pay interest. But piddly compared to what they make. And you do need to keep a minimum balance to offset the charges with the interest. Can they give EVERYONE back their minimum, on demand? No, not even that.

But all that is beside the point. The "compact" you speak of was foisted on the public. A legalized (by the government) monopoly. If a private merchant hid/obfuscated the essentials of his "compact" and the ramifications thereof, he would have 50 state attorneys-general plus Janet Rhinohaunches on his ass.

The system is both fraudulent and unstable. Period.

For an education on a real-life honest based money system --

-- A (A@AisA.com), December 12, 1999.

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