The strong are getting stronger and the weak are getting weaker. That's the takeaway from a USA Today article on the state of the U.S. banking industry. Nervous banking customers are taking their money from institutions that are perceived to be weak and moving the money to institutions that seem relatively strong. The problem, though, is that it's destabilizing some banks that are doing just fine, making them takeover targets. Banks that are struggling, meanwhile, become insolvent as customers yank money and move it elsewhere.
From the story:
Still, as long as funds are federally insured, depositors should not worry about losing their money, says Stephen Brobeck, executive director of Consumer Federation of America, an advocacy group: "There's no way the government won't meet its federal deposit insurance guarantees."
FDIC spokesman David Barr says the agency has a "flawless track record" of protecting consumers' life savings. "In our 75-year history, not a single customer has ever lost a penny of insured funds as a result of a bank failure," Barr notes.
These assurances provide little comfort to Walerstein, of Brooklyn. He says the collapse of the mortgage market, along with the use of taxpayer money to prop up the financial system, has made it hard for him to trust the government.
"If there's a major run (on the banks), I worry that there's a lot of us that will be out in the cold," Walerstein says.
Even if the FDIC didn't have enough to cover losses, the government could always just print more money, right? (Sarcasm writ large.)
Read the rest of the USA Today story here (link).