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Can Bank Of America Survive A 'Run On The Bank' In 2012?

Thursday, December 29, 2011 - 7:57 AMBank of America - Details
From TheStreet
What would happen if Bank of America (BAC) were to suffer a run on deposits?

While most of the discussion on regulatory reform in the wake of the banking crisis of 2008 has focused on capital strength, lending standards and mortgage loan servicing, it's liquidity problems that can quickly kill a bank.

4
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,743
1. Thursday, December 29, 2011 - 9:48 AM
If it is liquidity problems killing banks why do they act like they don't need our deposits.  I was recently told by the manager of a large bank that basically the only way his bank would be glad to take a large deposit from a depositor for which they would have to pay them even the small interest rate they have was for that depositor to walk in bringing them a friend who needed a "loan" at the same time!  It makes sense the way he explained it.  How can they pay us 3% on our savings unless they have someone who wants a loan and they can charge them higher loan rates to cover what they are paying the depositor and do not come out with a loss.  If they don't have the loans, they are just "holding" our money for us and having to pay us at a loss to themselves.  Don't like what he explained but it did make sense.   
3
ApacheApache43 posts since
Dec 5, 2011
Rep Points: 565
2. Thursday, December 29, 2011 - 10:28 AM
If it is liquidity problems killing banks why do they act like they don't need our deposits.  I was recently told by the manager of a large bank that basically the only way his bank would be glad to take a large deposit from a depositor for which they would have to pay them even the small interest rate they have was for that depositor to walk in bringing them a friend who needed a "loan" at the same time!  It makes sense the way he explained it.  How can they pay us 3% on our savings unless they have someone who wants a loan and they can charge them higher loan rates to cover what they are paying the depositor and do not come out with a loss.  If they don't have the loans, they are just "holding" our money for us and having to pay us at a loss to themselves.  Don't like what he explained but it did make sense.   
it's not that simple though. They also make money on all those pesky fees, from ATM to NFS, maintenance fees, statement fees and what not.
2
darkdreamer4udarkdreamer4u174 posts since
Jun 11, 2010
Rep Points: 630
3. Saturday, May 12, 2012 - 3:53 AM
I don't know if some of the sources I've seen in the past (such as The Money Masters or other "conspiracy-related" material is appropriate for this forum), but based on my understanding, cash is green gold for banks.  If you have a megabank account and also a smaller community bank or credit union account, it is possible to legally "rob the bank", "run it" or whatever.  Basically, if you keep your deposits in (say a trustworthy) credit union, you can write a check to yourself and deposit at megabank 1.  Write a check from megabank 1 to megabank 2.  Withdraw your deposit (after the check clears) from megabank2 in cash and give the green gold to whichever smaller, nicer, etc bank/cu you trust.  The more money you have, the more bank and credit union accounts you can have.  Banks basically have a reserve requirement of $1 deposited for $9 in loans (from what I've heard, even that alarming ratio has been relaxed).  They get to collect all that interest/fees on the loans.  Many credit unions actually have a much smaller ratio but they are generally not-for-profit and owned by their members.  If you do have an axe to grind against BOA, WF, Chase, etc... you can just keep giving them pieces of paper (checks) and taking their gold (federal reserve notes aka dollars).  Deposit and repeat the cycle.  Kind of like the shampoo bottle saying - rinse, lather, repeat.  The banking "scam" is that many of the larger banks are large because they loan out too much (and collect fat interest payments) verses what they have deposited, and cash money is the ultimate tangible treasure they have - not checks, credit card / debit transations.  But, many large banks are (wrongly) considered to be TBTF (too big to fail) so even if people run/legally-rob the bank, politicians might still have their back.
3
fragfarmerfragfarmer1 posts since
May 12, 2012
Rep Points: 3
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