In a modern financial system, nothing is more frightening than a run on the bank.
– Tom Petruno, “When faith is frayed”, July 12, 2008, LA Times
As most of you know by now, the Federal Government closed and siezed Pasadena, CA-based IndyMac Bank on Friday. IndyMac saw a run on its deposits in the wake of a letter by Senator Charles Schumer questioning its viability in the wake of large losses on mortgages.
In a Wall Street Journal article this morning on the IndyMac situation there was a picture of a line outside of the IndyMac branch in San Marino, CA yesterday of people waiting to get their money back (Queue At IndyMac Photo).
This kind of thing is pretty scary. I have to believe that many depositors are pulling money from other banks and this drain on bank’s cash could potentially lead to more bank failures.