Wachovia Faced Silent Bank Run - No More Lines

The days of a bank run being typified by long lines and Jimmy Stewart begging for calm are over. As what happened at Wachovia the run on the bank is now a few clicks away.

Online banking has changed how we interact with our banks. I have not walked into a branch once the ATM’s started giving me photocopies of the checks that I deposit.

So when Wachovia started springing leaks and ended up designated “the next bank to fail” by the media and the intelligentsia, smart customers lined up and started moving money out to get below the $100,000 FDIC insurance limit. Money started hemorrhaging out as customers got scared, and now Wachovia is Citigroup.

One more interesting point to all of this is how good the FDIC and Federal Reserve have gotten at shutting down a bank. The move to outsiders was so smooth and effortless that is barely raised a ripple on the surface of the media.

Inside Wachovia, executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday. “The so-called silent run on the bank – it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview. “When Congress failed to pass the ($700 billion bailout) proposal, when WaMu collapsed, you could see the money flowing. My computer screen was lighting up.”

Starting Friday morning, Evans said, businesses and institutions with large accounts started withdrawing money to lower their balances to below the federally insured $100,000 limit. They weren’t closing accounts, he said, adding “they were very apologetic in saying they love the service they get from Wachovia and they weren’t leaving Wachovia. They were just moving their money until things settled down.” via Charlotte Observer