gold bank runSD contributor AGXIIK warned readers months ago about the FDIC’s expanded deposit insurance which was set to expire Dec 31st, predicting that the expiring expanded deposit insurance enacted in the wake of the 2008 financial panic could trigger a bank run. 
Many scoffed at the report and its implications, due to the fact that the story received zero attention by the likes of Bloomberg, CNBC, or even ZH.

It appears that the expiring expanded FDIC insurance has in fact triggered a massive deposit withdrawal at the nation’s largest banks, as the Fed is reporting that $114 billion were withdrawn from the largest 25 US banks over the first week of January, the largest fund outflow since the 9/11 attacks, even exceeding the pace of the outflow during the 2008 financial panic!


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US banks shaken by biggest deposit withdrawals since 9/11
US Federal Reserve is reporting a major deposit withdrawal from the nation’s bank accounts. The financial system hasn’t seen such a massive fund outflow since 9/11 attacks.

­The first week of January 2013 has seen $114 billion withdrawn from 25 of the US’ biggest banks, pushing deposits down to $5.37 trillion, according to the US Fed. Financial analysts suggest it could be down due to the Transaction Account Guarantee insurance program coming to an end on December 31 last year and clients moving their money that is no longer insured by the government.

The program was introduced in the wake of the 2008 crisis in order to support the banking system. It provided insurance for around $1.5 trillion in non-interest-bearing accounts with a limit of $250,000. It was aimed at medium and small banks as the creators of the program believed bigger banks would cope with the crisis themselves.

So the current “fast pace” of withdrawal comes as a surprise to financial analysts because the deposits are slipping away from those banks which supposedly were safe. Experts expected savers in small and medium banks would turn to bigger players come December 31.

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  1.  Here’s another effect of ZIRP, which is bad enough in itself.   These withdrawals are  looking for a home. Banks looking to find places to invest this money. will start taking bad risks, either though imprudent lending or playing the rigged casino of the equities and bond markets. These small banks who were the recipients of money transfers will get badly clipped or destroyed in the next market crash. This is the plan of the big banks by the way. They are predatory and small banks are fair game.
     Unwary depositors will transfer some of their funds into the equities market looking for yield. New money is the only thing sustaining the rise in the Dow and S&P. With the earning reports coming out badly in 4Q 2012 and likely to be even worse in 1 and 2Q 2013, the stock market is back to its toppy level, luring in money seeking any kind of yield, even the riskiest.  It’s driven by liquidity, not earnings.
    The funds transfered to MMAs may find the government will allow the MMA manager to ‘break the buck’ and adjust investment values downwards, allowing these ultra safe funds to go below the $1 a share value. Many of the safe investments of the MMAs are in badly rated banks and other financial institutions. Some MMAs are getting pressure to reserve 5% of the funds and allocate them for investment losses, meaning that a person or company holding their funds in an MMA can’t withdraw the entire amount at one time. They may have to leave some on the table for potential ‘losses’ in the account.
    Most MMAs are paying 0% to negative returns. They strain to find safe yields in a world where there is no safety, not even in sovereign bonds.  The only income an account holder is likely to get  is a small rebate back from the fund manager, like Fidelity, who pays itself the entire income stream of their investmentsthen throws a bone to the investors of maybe. 01%, a little Oliver Twist bowl of gruel.  If that’s a safe parking lot give me something tangible like hard assets.  Most of these happening are new to us but are becoming the new normal in the upside down work of ZIRP investing.  IMO there is no safe FIAT investment out there today.
    A little extra intel this AM. $35 billion of investor funds, read small guys, rotated into mutual funds by Jan 9. In the last couple of years, hundreds of billions in private funds exited equities. The buying public, seeking yields, is now juicing the equity markets while trying to find a safe haven. But this won’t work well for them. They will be late to the game and by the time the smart money had ridden up their gains on the backs of the irrational exuberance of the small guys and dumb money, the race to the exits as markets tumble with strip even more wealth and net worth from Average Joe and Jane and their pension plans. The last market and housing bubble rout cost the public $8 trillion in net worth (a low estimate). This is an average of $40,000 per person in the last 6 years.
    The vultures, banksters and central governments are not finished strip mining the remaining net worth of of John Q Public. With $30-40 trillion in private net worth of Americans still on the table, the pension plans and retirement pools have $8-10 trillion sitting in plain sight, the next tempting target for a government that is morally and fiscally bankrupt. Watch your backs, these wretches have not nearly finished with us.
    XC Skater. I don’t have exact figures of who withdrew what but one of the more telling statistics is this. 85% of the American public has LESS than $10,000 in a bank account and a $10,000 net worth. That means the 15% who have more than this in their accounts may not be any smarter that those in the 85% category, but they are not going to leave their money at risk with a bank if there is no unlimited protection. They read, study and know something is amiss, even if they just don’t know exactly what. If nothing else, they are suspicious of a government that’s bared its fangs and made its intentions absolutely clear. Makers beware. If you are not at the table, you’re on the menu. Watch your Fiat carefully. It’s at risk.

  2. Does anyone know for a fact which type off acounts (rich or poor) are being withdrawn from, and for which reasons? Are people buying cars cash now, or funding daily costs? Is this the tax hit in effect?
    If you go on the streets and ask people why this is happening, are they in agreement? If not, it’s not a bank run I think.

  3. Although I wish things would progress, I doubt a bank run is occurring.  I worked for a few banks over the years and January seemed to always be the biggest month for withdraws.  I dont know the $ figure but property taxes, holiday debt and old people hitting up their IRAs in the new year seemed to always be the reason I heard.

  4. So because the FDIC said they would insure deposits up to $250,000 people believed the FDIC would insure deposits up to $250,000?  Kinda like how the CFTC would backstop MF Global?  Kinda like how the SEC would investigate fraud and manipulation?  Kinda like how the US Government would let institutions rise and fall on their own merits?  That’s pretty funny!

  5. If it is a bank run then it’s kind off quiet and nobody is speaking off it except here, Are you sure it’s not the FED messing around again with their Sticky Notes or maybe it was end of the year bonuses for the banksters. Mmmmmm

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