A Bank Run Reality Check

[Twisted Titan]

Letter Re: A Bank Run Reality Check

I have been trying to take the blinders off my wife’s family. While they are not ready to don tin foil hats with me yet, they definitely don’t think I am quite as eccentric as I was before. A failing economy can do that for people. I did have an interesting conversation with my Sister-in-Law though concerning banking. She is a branch manager of a bank; a very large banking institution. I don’t want to say the name, but as of 20 minutes ago, they have over 24,000 branches and ATM locations around the world. I asked her a couple of questions. What is the average amount in a savings account in her bank? And how much money does the bank have on hand on a given day?

The numbers shouldn’t have surprised me, but they did. The average amount in a savings account is about $1,200, but she said the numbers are really skewed as there are a few accounts that have lots, but most only have enough to keep the account open. She said that most just keep the account open so they have a place to cash their checks. The more shocking answer, was the total amount of cash on hand [for all of the tellers]. She said that the average that she keeps on hand is $16,500 in paper, and about $2,000 in coins. She said that twice a month they would double the cash on hand to accommodate pay cycles. So the most that this bank will ever have available is about $35,000.

Given that people with money have their pulse on the economy, they will know when it is time to pull their money out. If just one or two were to show up at my Sister-in-Law's bank to cash out. That’s it. In less than two minutes her bank will be empty of paper cash funds. Sure, she can call in and have a truck bring more in. But if every bank is in a similar situation, will any banking institution, no matter how big, be able to keep up with demand? The answer is no! I am sure that there are bigger banks with more money in the metropolitan areas, but there are also more people and that creates more risk of pandemonium when the coffers dry up.

The short answer is: Keep a good balance or options with your wealth. Have cash, silver, ammo, food, etc. You will not be able to pay your house payment in 7.62 Ball just yet, but when/if that time does come, I doubt the bank will be asking for a payment anyway. If nothing else having physical wealth (tangibles) that is at your house/retreat/cache/safety deposit box, whatever, is going to be more important that the 3% interest that you might be getting at the bank.

If, God forbid, something should happen to you and your assets are in the bank, when you die the State and Federal Government will take a very large portion of that “already been taxed” money and “allow” your heirs to have the rest. But if it is in silver/gold/ammo/guns/other tangibles, then it just changes hands. Thanks, - A.K.J. in North Carolina

[MNeagle]

safety deposit box

Surely he meant SAFE??

linky please?

[Twisted Titan]

10 stories down.......


http://www.survivalblog.com/

[Cobalt]

I'm pretty sure I remember reading years ago in a banks TOS something about they can limit how much cash you can withdraw

[Cebu_4_2]

I'm pretty sure I remember reading years ago in a banks TOS something about they can limit how much cash you can withdraw


My credit union says there is no limit, so I asked if I could withdraw a million and got a blank stare. No humor them people.

A couple years ago I pulled 25K out no problem... "please sign here sir".

[ShortJohnSilver]

I'm pretty sure I remember reading years ago in a banks TOS something about they can limit how much cash you can withdraw


I seem to recall there are 2 kinds of accounts: demand accounts and (some other kind). Only on demand accounts can you require the bank to give you everything.

[mrnhtbr2232]

Backed with the full faith and credit of the U.S. Government - not to worry. ;)

[Twisted Titan]

Follow Up story.............

Mr. Rawles,

After reading the letters about banking reality, I would like to add what I have learned from working at a reputable bank in the Midwest. The bank never has enough cash on hand to supply all their “demand “ or checking accounts, no matter what their legal fine print says.

The amount of cash is mandated by the Federal Reserve for the banks in their region. Each week the Fed tells the branch how much cash they can order, how much excess cash must be sent back to them, and how much cash they will need to fill the ATM. The branch has no control over this process.

The branch is under extreme pressure to maintain the least amount of cash in the vault needed for expected customer volume because the Fed charges compounding -interest on the entire amount. Every penny in the vault and teller drawers is earning interest for the Fed while in the possession of the branch. If your branch has a high customer and cash transaction volume the Fed will increase their allotment of currency. But, a small town branch with limited transactions, such as mine, will be given less.

Any given week people want to withdraw their own cash or cash large checks. Due to our small volume and limited cash we allow up to a certain amount (usually $3,000) for each request. Any withdrawal over that amount has to be ordered for the next week’s Brinks delivery. Most people are irritated by this, and a few get hostile, but we have no choice. The branch would empty the vault within the week if we honored all requests for large transactions.

What can go wrong? Brinks did not show up on their delivery date to replenish our currency, during a major holiday week when large withdrawals were expected. We were in panic mode, reduced the amount of cash we gave to customers, and anticipated having to empty the ATM machine in order to process transactions. As expected, customers were furious at our reduced capacity. Some asked pointed questions about why we could not produce their money...we had to apologize for the inconvenience and add them to the order for next week. It worked out that we had enough until the following week’s delivery, but the branch would have closed if we had run out of currency. BTW, no explanation from Brinks or the Fed for the missed delivery, we were on our own.

Another reality is money in a bank is only a number on a computer screen, and it can vanish without warning if the internet were to go down. That paper currency hiding in a house may be practically worthless, but it is still better than a computer number accessed by a plastic card. There have been times in my branch when the computer programs experience technical problems and we could not see any customer accounts. Since we cannot allow withdrawals without making sure they have the funds available the transaction is declined. You have not seen fury until you tell a customer they can’t have their money because the computer is down. During those technical problems it is bank-wide so customers could not go to another branch for money.

There have been rumors of giving the President the power to control the internet, for our own safety of course. What if that power is granted and the person in that office enacts the “kill switch” for whatever reason. Besides the whole of society coming to a halt it would mean banks and ATMs would close immediately.

A bank is a business making a profit. They do not hold our money out of charity…they get charged for it and they charge us for it. Set up your finances with the bank, but just know that they are subject to the same supply-chain disruptions as a grocery store and take precautions to keep cash and coin on hand. Thanks for this blog, we have learned so much and are taking our prepping very seriously. - T.O.

[Twisted Titan]

Some asked pointed questions about why we could not produce their money.

[dys]

I have always cashed my paychecks, because I like to deposit real cash into my account (which has never been at the same bank where my paychecks are drawn of of). A number of years ago when I was doing pretty well, once a month I would cash a large check (usually 8-10k, my commision check). It was always an experience doing this. Even though every single person at the bank knew me by name and sight, I would have to go through a long process each time I cashed one of these checks. First, the manager would have to approve the transaction. Then, I would have to wait while the manager punched in a code to a machine that was independent of the tellers' cash registers. Finally, after a few minutes the machine would spit out the cash. The entire process took upwards of 30-45 minutes and was extremely annoying...but at least I got my money. I wonder what would happen now if I tried that.

dys