2008 Financial Crisis [this is not finished yet, I will make change tomorrow] ------------------------------------------------------------- I remember it was reported that, the 2008 financial crisis was related to bank runs. Well, the cause of bank runs can be public panicking about the health of the economy or of the financial market, but it may also be the actions of political. This Wikipedia article, >, provides overviews of the bank run events around the world in the past 150 years, which is included below. Now let me just summarize the cause of these bank run events listed in this Wikipedia article (assuming that these on the list are the largest bank runs). --- (1) In 1886, “Overend, Gurney and Company” (in London). CAUSE: bad investment in railway stock; (2) In 1927, “Shōwa Financial Crisis” (Japan). CAUSE: Earthquake and bank bankrupt rumors (i.e., public panicking). (3) In 1994, “Banesto” (Spanish bank). CAUSE: “equity hole” being discovered. (4) In 1999, “MBf Finance Berhad” (biggest finance company in Malaysia), [note the Wikipedia article did not states cause] (5) In 2001, in Argentina. The Wikipedia article says “There are various theories into the cause”. I believe this bank run is easy to understand, because Argentina has a history of having massive external debt, and the public simply does not have confidence in its own currency, worrying about inflation. (6) Aug 2007, “Countrywide Financial” (US firm), CAUSE, subprime mortgage crisis. (7) Sept 2007, “Northern Rock” (British bank), CAUSE, news reports of the bank’s liquidity crisis. ---- (8) March 11, 2008, “Bear Stearns” (U.S. Firm). CAUSE: rumors from credit officers of rival firms. (9) July 11, 2008, “IndyMac Bank” (U.S. Bank, see below). CAUSE: Senator Charles E. Schumer released to the media letters he sent to the regulators, which warned the bank might not be viable. These letters caused the depositors to pull out approximately 7.5% of the banks deposits the following days. (10) Sept. 25, 2008, “Washington Mutual” (U.S. Bank). CAUSE: the article only says “Over the previous 10 days, customers had withdrawn $16.7 billion in deposits” (11) Sept. 25, 2008, “Wachovia” (U.S. Bank). CAUSE: Large businesses and institutional investors drew down their accounts below the $100,000 limit for FDIC deposit insurance.(silent run”). ----- (12) Oct. 6, 2008, “Landsbanki” (Iceland bank), The article does not say the Cause of bank run. (or just “bank failure”) (13) Oct 2009, “DSB Bank” (Netherlands), CAUSE: Mr. Pieter Lakeman, on national TV, called on savers to remove money from the bank (i.e., pubic panicking) (14) Dec 11, 2011, “Swedbank and SEB” (Swedish banks). CAUSE: Twitter rumor (i.e., public panicking) (15) March 24, 2014, “Jiangsu Sheyang Rural Commercial Bank” (China). CAUSE: rumors of bank turning down cash withdrawal (i.e., public panicking) (16) June 20, 2014, “Corporate Commercial Bank” (Bulgaria). CAUSE: accusation of bank related persons for attempted murder of politician and media mogul (i.e., politics) ------------------------------------------------------------------------------------------------ So if you look at these 16 large bank runs in the world in the past 150 years, as listed in the Wikipedia article, only 5 of them happened in the U.S, and 4 of them were in 2008. Moreover, most of other bank runs in the past 150 years in the world were caused by public panicking. But in 2008, for the four severe bank runs in the U.S., at least three of them were NOT caused by public panicking! There 3 bank run were either caused by “officers of rival firms”, or by a Senator, or by “Large businesses and institutional investors”! ----------------------------------------------------------------------------------------------- Also when BO (Barack Obama) became the president in 2008, many people on Wall Street accused him of being one of the “communists” because of the 2008 crisis. In fact it had nothing to do with BO, personally; it was, again, by “THEM-g”, the left side of the dark political power of this country. ========================================================== The followings are copied from the Wikipedia article entitled “List of bank runs” (en.wikipedia.org/wiki/List_of_bank_runs) This is a list of bank runs. A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank might fail. As more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.[1] Contents 1 1800s 2 1920s 3 1990s 4 2000s 5 2010s 6 See also 7 References 1800s In 1866, Overend, Gurney and Company suffered a bank run. It incorporated as a limited liability company in 1865, but with poor railway stock prices, it suffered losses. Assistance from the Bank of England was refused, and payments were suspended on 10 May 1866. A panic ensued. 1920s The Shōwa Financial Crisis was trigerred off in January 1927 when the Bank of Japan proposed to redeem discounted bonds it had issued to overextended banks in the wake of the Great Kantō Earthquake. The news resulted in rumors that banks holding such bonds would go bankrupt. The ensuing bank runs led to the fall of 37 banks across the Empire of Japan and the resignation of Prime Minister Wakatsuki Reijirō. 1990s In early 1994 thousands of clients rushed to Spanish bank Banesto to withdraw their money.[2] Banesto was taken into control by the Bank of Spain when they discovered a 450,000 million Pesetas (€2,704 million) equity hole in banks finances. In 1999, a bank run happened in Malaysia where Bank Negara Malaysia (the Malaysian central bank) had to take control of MBf Finance Berhad, the biggest finance company in Malaysia during that time. Many of the finance companys 120 branches saw runs on their deposits, totalling about 17 billion Ringgit (US$4.49 billion).[3] 2000s In 2001, during the Argentine economic crisis (1999-2002), a bank run and corralito was experienced in Argentina. There are various theories into the cause.[4] This contributed towards the bank runs in neighbouring Uruguay during the 2002 Uruguay banking crisis. Since 2008 there have been several bank failures in the United States of America which were a result of bank runs.[citation needed] In early August 2007, the American firm, Countrywide Financial suffered a bank run as a consequence of the subprime mortgage crisis.[5] On 13 September 2007, the British bank Northern Rock arranged an emergency loan facility from the Bank of England, which it claimed was the result of short-term liquidity problems. The resulting bank run was not the traditional form, where depositors withdraw money in a snowball effect, leading to a liquidity crisis; instead, it occurred after news reports of a liquidity crisis that was not a bank run.[6] The resulting financial crises ended with the nationalisation of Northern Rock.[7] On Tuesday, 11 March 2008, a bank run began on the securities and banking firm Bear Stearns. While Bear Stearns was not an ordinary deposit-taking bank, it had financed huge long-term investments by selling short-maturity bonds (Asset Backed Commercial Paper), making it vulnerable to panic on the part of its bondholders. Credit officers of rival firms began to say that Bear Stearns would not be able to make good on its obligations. Within two days, Bear Stearnss capital base of $17 billion had dwindled to $2 billion in cash, and Bear Stearns told government officials that it saw little option other than to file for bankruptcy the next day. By 07:00 Friday, the Federal Reserve decided to lend Bear Stearns money, the first time since the Great Depression that it had lent to a nonbank. Stocks sank, and that day JPMorgan Chase began an effort to buy Bear Stearns as part of a government-sponsored bailout. The deal was arranged by Sunday in an effort to calm markets before overseas markets opened.[8] On 11 July 2008, U.S. mortgage lender IndyMac Bank was seized by federal regulators. The bank relied heavily on higher cost, less stable, brokered deposits, as well as secured borrowings, to fund its operations and focused on stated income and other aggressively underwritten loans in areas with rapidly escalating home prices, particularly in California and Florida.[9] A highly stressed institution,[10] IndyMacs capital was being lost to downgrades as the poor quality of their book was revealed.[11] Regulators at the Office of Thrift Supervision (OTS) had allowed the bank to misstate its financial condition, avoiding regulatory intervention.[12][13] On June 26, Sen. Charles E. Schumer released to the media letters he sent to the regulators, which warned the bank might not be viable. In the days following the release, depositors pulled out approximately 7.5% of the banks deposits.[14][15] IndyMac and the OTS regulators who had allowed the bank backdate its books blamed Schumers letters for the banks demise. These regulators resigned or were fired amidst a Treasury Department investigation.[13][16][17] IndyMacs failure is expected to cost the FDIC more about $9 billion.[9] Uninsured depositors have lost an estimated $270 million.[18] On 25 September 2008, the Office of Thrift Supervision was forced to shut down Washington Mutual, the largest savings and loan in the United States and the sixth-largest overall financial institution, on a Thursday due to a massive run. Over the previous 10 days, customers had withdrawn $16.7 billion in deposits. This is currently the biggest bank failure in American financial history. Normally, banks are seized on Fridays to allow the FDIC the weekend to prepare the failed bank for takeover by another bank. However, WaMus size led regulators to shut it down on a Thursday.[19][20][21] On 26 September 2008, Wachovia, the fourth-largest bank in the United States, lost $5 billion in deposits—about one percent of its total deposits—when several large customers (mostly businesses and institutional investors) drew down their accounts below the $100,000 limit for FDIC deposit insurance. This practice is known in banking circles as a silent run. The Office of the Comptroller of the Currency and the FDIC were both concerned that Wachovia wouldnt have enough short-term funding to open for business on 29 September—which would have resulted in a failure dwarfing that of WaMu just a day earlier. They pressured Wachovia to put itself up for sale over the weekend.[22] Initially, Wachovia was to sell its commercial banking operations to Citigroup, but eventually the entire company was sold to Wells Fargo. On 6 October 2008, Landsbanki, Icelands second largest bank, was put into government receivership. The Icelandic government used emergency powers to dismiss the board of directors of Landsbanki and took control of the failed institution. Prime Minister Geir Haarde also rushed measures through parliament to give the countrys largest bank, Kaupthing, a £400m loan. In addition, Iceland pleaded with Russia to extend 3bn in credit as western countries refused to help.[23] With over 5bn in savings held by Britons in Landsbanki, the Icelandic collapse threatens private citizens in the United Kingdom as well as companies in Iceland.[24] October 2009 bank run on DSB Bank in the Netherlands after bank run caused by Pieter Lakeman.[25] 2010s On 11 December 2011, a rumor was spread via Twitter that the Swedish banks Swedbank and SEB was having problems and there was a lesser hysteria in Latvia. People emptied their accounts, and according to local media there were long lines of people at the cash machines.[26] On December 12 the authorities started an investigation to locate the cause of the rumors, and the spokesman for Swedbank said that the situation seemed to be calming down.[27] Jiangsu Sheyang Rural Commercial Bank in Yancheng, China suffered a three-day bank run on 24 March 2014, after rumors of the bank turning down a cash withdrawal transaction emerged.[28] Some branches remained open for 24 hours for the duration of the bank run, and tellers stacked cash behind teller windows to calm and reassure depositors.[29]
Posted on: Sun, 14 Dec 2014 01:35:17 +0000
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