How could this not have been the next link in the chain?
The mortgage crisis that became a credit crisis appears to now be a banking crisis, and investors are runnin' scared again, causing mob scenes at banks as customers withdraw as much money as possible, hoping to find a seemingly safer place to invest, like abroad (where the Euro is the strongest against the dollar in history) or in a mattress, mason jar or brassiere.
For its part, the FDIC has sought to reassure Americans that the nation's banks are "absolutely safe."
While President Bush tried to calm the nation, he was drowned out by the doom-and-gloom sounds of Federal Reserve Chairman Ben Bernanke and reporters everywhere.
The New York Times reports that it's not just neighborhood banking customers baiing out of banks:
The mood darkened further on Tuesday, when the Wachovia Corporation was compelled to assert that it was sound as its share price was swept lower for a fifth day. Wachovia fell nearly 8 percent, leaving it down 76 percent this year.
The 12-stock Standard & Poor's 500 Regional Banks index sank nearly 4 percent, extending its 11 percent decline from Monday. Financial companies like the American International Group, Bank of America and Citigroup pulled the Dow Jones industrial average down nearly 1 percent.
It is a stark reversal of fortune for the banking industry, and for regional lenders in particular. Many regional banks, big enough to have some heft, but small enough to be managed effectively, rode the mortgage boom to higher profits. Many avoided the alphabet soup of complex debt investments that have cost big banks tens of billions of dollars.
Regulators are moving to react to bank runs by aiding the banking industry, according to the Wall Street Journal (subscription required):
Federal regulators are stepping up efforts to ensure the banking industry's access to short-term cash, amid concerns about bank runs and worries that liquidity-conscious lenders will hoard money and stop making loans.
On Tuesday, the Federal Deposit Insurance Corp.'s five-member board agreed on a new policy aimed at encouraging the development of a "covered bond" market, which policy makers hope will direct more funding toward mortgage lending.
Meanwhile, banks aren't universally doing the best things to help themselves. Well -- maybe they are "helping themselves." Footnoted's Michelle Leder dug this up on a Cleveland-based bank:
But the interesting thing about National City is that it comes on the heels of this 8K filed late Friday. While the company announced CFO Jeffrey Kelly's retirement back in July, it waited until Friday to file Kelly's release agreement, which shows that he'll continue to collect a hefty paycheck from the bank through September 2010 -- $60K a month through the end of December and then $54K a month through Sept. 2010. There's also a $1.1 million lump sum payment that will be paid next April. Assuming there is a next April for National City. Surprisingly, the release doesn't really delve into what happens to those payments if the worst should happen.
To be fair, Kelly is a long-time employee of National City having worked at the bank for 29 years. But given the current state of the bank, it still seems like a mighty rich send-off.
Will calmer heads prevail? How long will the runs last? Wait -- are there calmer heads (other than the one behind the podium at the White House)?
Well, sure. And some of them blog here at the Huffington Post. See below.
::Vince Farrell's post on Fannie Mae and Freddie Mac says, "This too shall pass."
::Dan Solin's second post on sitting on the sidelines in a bad market says, "Dumping stocks in bad times is probably the worst investment decision you can make."