Hutch Reports On A Potential Financial Crisis

Aug. 10, 2008 - PRLog -- Banking customers, both large and small, await with bated breath on news of which major bank could be the next to be taken over by the FDIC. On Friday, Indymac Bank was closed by the FDIC and that closure was met by fear when some customers showed up at Indymac Bank locations only to find armed guards and locked doors to greet them. On Monday morning there will most definitely be a huge shudder felt throughout the US financial and stock markets as rich Americans take inventory of how much money they have on deposit in any individual bank.

The federal government provides insurance to banks to guard against customer-led bank runs which can lead to insolvency in a short period of time. For years, that FDIC insurance protection has held steady at $100,000 and, for the most part, that insurance protection has helped modern day banks prevent insolvency by encouraging depositors that their money is safe and backed by the full faith and credit of the United States of America.

However, tomorrow morning there will be a different kind of run on the banks of America. Instead of small depositors becoming scared and rushing to their local bank to withdraw small amounts of money, thousands of wealthy customers and large businesses that maintain balances in excess of $100,000 will be rushing to transfer their funds to alternative banks in order to not leave money in any one financial institution over the $100,000 insured limit. This mass transfer of money will hurt Americas largest banks the most because they have hundreds of commercial and businesses accounts that routinely leave large sums of money deposited in accounts with daily balances well in excess of the $100,000 FDIC insured limit.

Keep a close eye on U.S. financial markets tomorrow as this mass transfer of cash takes place all across the country. Some banks that are already suffering from massive losses in the sub-prime leading market could find themselves in a liquidity crisis by close of business tomorrow. While the FDIC closure of Indymac Bank was designed to firm up customers fears, it also had the effect of sending shock waves down the backs of some of Americas wealthiest people and companies. Watch what the wealthy people, major companies and pension plans do tomorrow with their uninsured fund in U.S. banks and you will learn if the closure of Indymac Bank on Friday was the end of this current run on the bank crisis or just the start of a financial disaster that will play out all this week.

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