Don't Start Yanking Your WaMu Accounts

The scary headlines about WaMu’s stock slide have a few readers worrying if now is the time to pull their deposits. I’m a WaMu customer myself and I say no. For now, though I could be wrong, this just looks like more hot panic sweeping the market. First off, you’re FDIC-insured up to the first $100,000. You will get your money. Secondly…

In the event of WaMu failing, the FDIC will swoop in and your deposits will be assumed by a new bank. You would still have access to your deposits as normal via ATM, check, and debit cards. There might be a brief delay while they re-establish telephone and internet access.

The worst thing for WaMu would be if a run on the bank started, vaporizing their liquidity. Then people worried about the worst happening would be in fact causing it.

(Photo: thekateblack)

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  1. nicemarmot617 says:

    Heh, I pulled my account in January after they kept failing to stock the ATMs around my apartment and office in Manhattan. It was ridiculous. I opened a Chase account and that has been its own nightmare, but at least there is always a working ATM!

  2. humphrmi says:

    I’m glad to see this. Too bad it wasn’t posted before panic caused Bear Stearns and Lehman to implode.

    • Mr_Human says:

      @humphrmi: Different situation. Panic didn’t cause Bear Stearns and Lehman to implode, lack of liquidity did: they went broke. Plus, they weren’t consumer banks, so there couldn’t be a run on them. Liquidity might also bring down Wamu; a run might simply accelerate their end.

      • @Mr_Human:

        There can be runs on investment banks. A run does not have to be people standing out front trying to get in Mary Poppins style. If the investors start pulling their money, as in the case of Bear Sterns, an investment bank can suffer the same liquidity issues as if everyone tried to close their accounts at the same time.

        • Mr_Human says:

          @johnarlington: Interesting, I didn’t realize Bear Stearns fell apart because investors were pulling money. I thought BS simply _lost_ their investor’s money, that their asset values had tanked. I know that some investors sued Bear Stearns.

          • hellinmyeyes says:

            @Mr_Human:

            Bear Stearns went under because they couldn’t value their assets, all those ridiculous mortgages. As a result, the company pretty much had to write them down as $0’s (more or less), which meant they didn’t have enough cash on hand to account for regulatory (or just even common sense) allocation conventions. We all know that the assets aren’t worth $0, but we really don’t know that they’re worth much better, which is why companies in this position get bought at quite a bargain for what they eventually will post once the investments mature.

      • mugsywwiii says:

        @Mr_Human:

        Panic didn’t cause Bear Stearns and Lehman to implode, lack of liquidity did
        Panic DID cause Bear Stearns to fail:
        [www.vanityfair.com]

        On Monday, March 10, the rumor started: Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon the speculation created its own reality, and the race was on to keep Bear’s crisis from ravaging Wall Street.

        A company that otherwise would not have failed was brought down by unfounded panic.

  3. ChicagoAndy says:

    I recommend all my wamu friends pull their account. While it’s true the FDIC will ensure your deposits, think of the customers of IndyMac who found the doors to their branches chained shut. The FDIC process takes time to get things sorted out.

    Wamu is currently paying 20% premium to insure their bonds. This means the bond market is betting on Wamu’s failure. They’re rarely wrong. [www.reuters.com]

    All wamu customers would be smart to open up a second account and start changing over their direct deposits and automatic withdrawals before the inevitable happens.

    As for the idea that customers jumping ship will cause a run on the banks – well, stopping a run on the banks just isn’t our job. Our job is to give our business to banks that we have confidence in.

    _Am

    • TechnoSmurf says:

      @chicagoandy:

      That last line of your post is perhaps one of the most true things I’ve seen here the last few days. If you’re sure WaMu can survive the tide, then stay with them, or if you agree with the current analysis of WaMu’s status and dont feel secure anymore, pull out.

      Given the current state of the economy, virtually any stable bank/credit union would LOVE your business right now. And besides, dont forget all those rules regarding the FDIC insurance. Make sure you understand them THOROUGHLY if you decide to stick with a troubled bank.

    • mugsywwiii says:

      @chicagoandy:
      @KSPRAYDAD:
      Yet another 100+ year old company down the drain because of simple-minded people panicking. :(

      • @mugsywwiii:

        chicagoandy isn’t suggesting that you take all your money and hide it under a mattress. He is suggesting that you give your business to another bank. The money would still remain within the banking/finance system and reward those banks that weren’t playing loose with their depositors money.

        • mugsywwiii says:

          @johnarlington:
          And in the process, you make the failure of the company inevitable. And to what end? The whole point of the FDIC is so you don’t have to worry about the financial condition of the bank. If you’re unhappy with the service you’re receiving, by all means move your money to another bank. But you DON’T need to move your money because you heard the bank is hurting.

          Please stop spreading FUD. You’re making the situation WORSE.

          • ChicagoAndy says:

            @mugsywwiii:

            Making the situation better is not our job.

            On the other hand, protecting our assets, peace of mind, and minimizing hassle is our job.

            I doubt the customers of IndyMac got any warm fuzzies when they found the doors to their bank literally chained shut and had to wait for FDIC bureaucrats to cut a check.

            WaMu is going down whether customers bail or not. It’s best to get out of the way.

            _Am

      • metsarethe... says:

        Pull your money out of Wamu…Especially when blogs tell you not too

        @mugsywwiii: Correction, simple minded people with their $$$

        • metsarethe... says:
        • mugsywwiii says:

          @metsarethe…: Consumerist is a very anti-corporation blog. When even they tell you not to do something that will screw a large corporation, that should make you wonder.

          • Ben Popken says:

            @mugsywwiii:

            Consumerist is a very anti-corporation blog.

            Not quite. We’re anti stupid business practices that hurt people (and ultimately, their own profits), and pro-consumer.

            • MissTicklebritches says:

              @Ben Popken: thanks. I needed that. I just opened a WaMu account last month.

            • Elviswasntmyhero says:

              @Ben Popken:

              “For now, though I could be wrong,”

              Stop while you’re ahead Ben. People in The Western World have been and continue to be lied to about the banking and financial vultures (namely The Federal Reserve) that cause catastrophes the likes of which we are currently witnessing in the financial markets.

              “First off, you’re FDIC-insured up to the first $100,000. You will get your money.”

              Uh, those are several dangerous assumptions that you’re making:

              1. People who have more that the $100,000 amount in banks have successfully manipulated their balances to fall under that insurance limit.

              2. That the FDIC will have enough money to cover all of the assets of the banks that have failed and will continue to fail.


              + Watch video

            • buckfutt says:

              @Ben Popken:

              So Ben, how about a post on what happens to a mortgage held by a bank that fails (like, er, mine, which is with WaMu).

      • KSPRAYDAD says:

        @mugsywwiii: Hey, thanks for the free insult. Perhaps it is the simple minded leadership of the US banking system and corporate shills that you should be worried about instead.

        Anyway..MY job is not to protect WAMU, MY job is to protect MY family’s interests … having our money tied up and going through the FDIC hoops doesn’t qualify as protecting MY family’s interests.

      • Moonshadows says:

        @mugsywwiii: Yet another 100+ year old company down the drain because of simple-minded people panicking. :(

        No, yet another 100+ year old company down the drain because they made bad business decisions. It’s not their customers responsibility (nor the governments) to save them from their own stupidity.

        • mugsywwiii says:

          @Moonshadows: You don’t need to do anything to save them. Just don’t force a collapse by joining the sheeple pulling their money out when they have nothing to fear but fear itself.

          • KSPRAYDAD says:

            @mugsywwiii: First I was simple minded now I’m sheeple…what makes you the arbiter here? Your condescending attitude reminds me of those that are currently running our financial systems into the ground while all the while making sure their own money is safe and sound.

            • mugsywwiii says:

              @KSPRAYDAD: How else do you describe the people who follow the mob mentality and create a run on a bank?

              • KSPRAYDAD says:

                @mugsywwiii: That is the issue…who CREATED a need to wd the money in the first place. NOT the customers but the people running that firm. Now why is it that I should keep my money in a firm that is so poorly run? I thought being a Consumerist was about voting with our feet and our cash to demand better of companies.

                I didn’t help create a run on the bank by removing my funds…the management of Wamu CREATED the run by being asshats in the first place.

                As for ‘mob mentality’…perhaps you’ve heard of the saying ‘wisdom of the crowds’?

                [books.google.com]

              • Ass_Cobra says:

                @mugsywwiii:

                The concept of panic being caused by people making a run on the bank is laughable. As a bank or any other financial intermediary, your main currency is your credibility. When you expose yourself to risks you don’t understand and fail to demonstrate that you have mitigated your risk sufficiently you lose credibility and your counterparties and depositors should rightly lower their exposure. Just because a lot of people are doing something, doesn’t mean it’s herd mentality. Individual survival interest can often result in collectively similar actions.

                What I am shocked about is the Consumerist trying to convince consumers that it is somehow in their best interest to keep money at an institution that has shown surprisingly poor stewardship of said money and has a reputation for terrible customer service. The notion that the FDIC is there so don’t worry is ridiculous. Why should a consumer put their finances in any sort of jeopardy when there are plenty of sound secure banks that are willing to take deposits? It boggles the mind to be honest. If there were some rationale, other than not creating a run on the bank (i.e. WaMu is offering to waive fees, better interest rates than comps, etc.) then I would understand the incentive, but as reported these don’t seem to exist.

    • @chicagoandy:

      Well said.

      ————————-

      Additionally the fact that they aren’t keeping ATMs stocked should also be a sign that things are amiss at WAMU.

      Additionally, just because a bank is FDIC insured doesn’t mean that FDIC has enough money to insure enough deposits if a wave of failures sweeps through the banking industry. Many of the major banks finances are intertwined with each other through the use of swaps and other odd financial slights of hand. If one goes, it has the power to force defaults at other banks. This is a big reason why BofA was so quick to buy up Country Wide and Merrill. It is also why AIG is in deep doodoo.

      At a minimum. I would keep enough cash on hand to get by for a while if you were to loose access to your money. What would you do for food and gas if you were to loose access to your funds for a week or two. Its a good idea anyway to keep an emergency fund of small bills at home to get you through any sort of disaster, financial or natural.

    • dveight says:

      @chicagoandy: This mentality is the exact reason why this nation is where it is now. See something and jump all over it. People saw housing explode so they jumped all over it, banks saw people buying houses so they approved loans, loans default, banks lose money, people jump ship, etc… Monkey see, monkey do.

      @metsarethe…: HSBC and BofA? Only if you are looking for a bank that seems secure for now, but with HSBC, don’t cry if you personal information is stolen, nor when BofA nickel and dime you to death.

      Jesus, I could go on forever here with all of these comments.

      @mugsywwiii: You are one of the few people posting that seems to understands that having WaMU fails is a HUGH disaster. People, protecting your money/asset is a high priority; and helping protect WaMU from failing will not only help them and the economy, but your assets and value of your money too.

      Personally, I’m sticking with WaMu. Why? It’s FDIC ensured and worst case scenario, I won’t be able to access my money for some time; but I did the smart think and have my money spread out through different banks/brokerage. For the people bitching about having to update their bill payments, look, if you switch now, or later, you are going to have to anyways.

      • sleze69 says:

        @dveight: “having WaMU fails is a HUGH disaster.”

        As bad as a writer as she is, all of this was echo’d in Ayn Rand’s Atlas Shrugged. Having the government REPEATEDLY bail out failing businesses is not good the the economy. We need a culling of the Herd.

        Another great example of Ayn Rand’s foresite is what happened to Zimbabwe after they claimed all the farms from the farmers who actually had skill. Instead of working for the government that just stole all their property, they all left and the Zimbabwe economy collapsed.

        Someone needs to re-edit the book for human consumption or our business “elite” need to bite the bullet and read it.

  4. KSPRAYDAD says:

    Yep…why wait for the failure and then for the FDIC to come to the plate…pull now ask questions latter imo.

  5. OfficeMaxie says:

    I wish I close my account months ago, when they raised my business overdraft interest rate to 18% (at a time when everyone else was lowering their rates). They refused to negotiate. I went to a new bank, and got at 8%. Wamu Losers.

  6. ideagirl says:

    I’ve already moved my money to a box under my bed. um, I mean another bank…yeah, that’s it. I’ve moved it to another bank. I have very little confidence that the FDIC will be able to sustain deposits with the growing number of banks going under.

  7. maztec says:

    How long does it take to get your money? In the past it could take years. The more banks that bankrupt, the longer it takes presumably. Sure, “as soon as possible”, is what the rules say, but how long is that?

  8. tankertodd says:

    Act in your own self-interest, not in the bank’s. That’s surely how they operate. Why would you be any different?

    It’s like the employee who has some strange loyalty to their employer, who would not hesitate to lay them off to save their own bacon. Because neither is put to the test, this truth is never revealed to them.

    • MercuryPDX says:

      @tankertodd: It’s like the employee who has some strange loyalty to their employer, who would not hesitate to lay them off to save their own bacon.

      Been there, done that…. amazing how it gives a “red button reset” to your notions of work/life balance.

    • mugsywwiii says:

      @tankertodd: That is exactly my point – a run on WAMU is detrimental to ALL of us, including WAMU’s customers. Preventing a run is acting in your own self-interest.

      • lightaugust says:

        @mugsywwiii: Go with simple minded people who buy risky mortgage securities.

        My question, if anyone can help me, is how much better off are credit unions right now? Are the FDIC rules similar? I have more confidence in their liquidity, but less in their backing.

        • Mr_Human says:

          @lightaugust: Or simple minded people who think they’re investment geniuses.

        • hellinmyeyes says:

          @lightaugust:

          Couple of comments. Credit unions have NCUA or some state equivalent. Very similar to the FDIC. In addition, yours should be posting an annual or quarterly report to you as a member stating financial positions. Definitely don’t ignore those. Read up and see what the balance sheets are like; they’re not complicated. That, along with the NCUA’s or bankrate.com’s rating system, should help you judge the financial health of your CU.

    • aristan says:

      @tankertodd: It’s like the employee who has some strange loyalty to their employer, who would not hesitate to lay them off to save their own bacon.

      Monetary version of Stockholm Syndrome. You’re so used to the person/company that abuses you, yet they have perceived control over the situation, so you not only let them do what they want, you defend their right to do it.

      @NTC-Brendan: I did take the precaution of pulling our “Emergency Fund” (around 4-6 months of expenses) out in cash.

      How is taking, let’s be conservative, $5000 out of WaMu not doing the exact same thing as closing your accounts entirely? If you and 999 other people all pull 5000 bucks out of WaMu at once, that’s a lose of $5,000,000 immediately. You’re sure that WaMu will survive and everyone should leave their money in there, but you’re gonna play on the safe side. Sounds like someone is fence sitting.

  9. I agree that to panic pull all of your money out of your current bank is not prudent. However, like I posted, I would keep enough money on hand to ride through what looks like an inevitable failure and subsequent reorganization of WAMU. There wasn’t a run on Merrill or Leahman from their investors. They failed under the weight of their own mismanagement and poor investments. With IndyMac excluded, the other bank failures this year also did not occur due to ‘runs of the bank’. Again, they failed due to a lack of liquidity, failure to price risk, and the flawed business model that real estate would perpetually increase in value. Anybody who’s been paying attention to the financial storm coming could have told you 2 years ago that Country Wide, Indy Mac, and WAMU were going to be the first to go belly up.

  10. Another problem is that a large percentage of Americans don’t make logical financial decisions. Its half the reason we’re in this mess to begin with. Millions of people bought more house than they could afford and took out loans with questionable terms because they thought they were going to get rich. Once they see the pendulum swinging in the opposite direction, I would expect that there may well be runs on the bank. I hope that they don’t, and I don’t advocate that people do. I just suggest that people prepare for the fact that there might be a financial melt down. It isn’t reckless to suggest that one has a grand or two of their savings liquid.

  11. HRHKingFridayXX says:

    Of course its always better not to panic, when that panic causes further destruction.

    However.

    I, like many Americans, live a fairly rigid lifestyle. My paychecks are neatly divided up between rent, student loans, groceries, and maybe a monthly night out. That extra little cushion in my account is all I have (so far) and if I lost it and the next paycheck, I’d be looking at late rent (evictions?), late loans, and living off my emergency stash of food. Sorry, but that doesn’t sound desirable. If I had a WAMU account, I’d be switching my direct deposit soon and taking out the little bit I have saved.

  12. hipersons says:

    best post about the banks in a while. thank you for being chicken little.

  13. GinaLouise says:

    Thanks very much for this post … I’m a Washington Mutual customer and I’ve been wondering what I should do. My savings + checking account combined are about $5,000, and though I’m a rational person who has faith in the FDIC, part of me wants to start digging a hole in the backyard for my money.

    I’m going to leave my money with WaMu and make sure I have enough cash on hand for the short-term, but is there anything I should do? Besides, of course, making sure my documentation is airtight and I have plenty of up-to-date account statements. I’m not sure how I should be preparing myself.

  14. B says:

    Well, judging from the other WaMu postings, you do have to consider that WaMu seems to enjoy screwing over their customers, which is a much better reason to leave them.

  15. Oh goodie, let’s start another bank run.

    FDIC is going to protect your couple bucks. The money will be there on the next business day. Shucks, darn, lighten up.

    IF you are really worried about the bank and not having split second access to your funds then by all means have an account at a second bank… which by the way is never a bad idea anyway as a means to avoid ATM fees or having access to a bank account when you are out of town.

    • Orv says:

      @Corporate-Shill: The FDIC may cut you a check within a few business days, but when IndyMac failed some people found those checks weren’t particularly negotiable. It was reported here that some banks were holding them for up to eight weeks. That’s why I’m pulling my money; I know the FDIC will make me whole, but I can’t afford to wait two months for that to happen.

  16. failurate says:

    Would shutting off access to your money be considered poor customer service? The goal is to prevent people from suffering poor customer service, right?

    The fact that we’re even discussing it means it’s too late.

    Unless you are really curious about the FDIC and willing to invest your time and money into seeing how it works, close your account.

  17. joebar says:

    If they fail, does this mean I wont have anyone to pay the rest of my 250k mortgage to? :)

  18. yasth says:

    The FDIC will, if need be, be bailed out faster than you can say “saving the banks of main street” the federal part in there isn’t a joke. Also it is political suicide to go against helping savers who played by the rules, as well it should be really.

    • mugsywwiii says:

      @yasth:
      Exactly. The amount of money the FDIC has on hand is the least of my worries. But if you’re worried about that, making a run on a bank is only going to make it worse. It’s the idea that everyone else is going to do it that causes everyone to do it. The Consumerist is doing a good thing by reassuring people that if WAMU goes under your money will be safe. That’s the whole point of the FDIC – to prevent what happened during the Great Depression.

  19. doughboys says:

    The cost to insure $10 million in Wamu bonds right now has soared to $5 million upfront plus $500k yearly.

    [www.bloomberg.com]

    Not a very attractive investment.

    Last week Lehman and AIG were represented as liquid and well funded with many more good assets than bad. Lehman is gone now and their assets are being liquidated for between a nickel and 35 cents on the dollar. AIG is literally begging for cash from anyone that will listen. What happened to liquid and well funded?

    A Wamu failure would be more than an already admittedly underfunded FDIC (by their own standards) could handle. While a failed bank normally opens the next day the FDIC would require a taxpayer bailout or a bank consortium action to re fund them before they could liquidate depositor funds. This could cause a delay in accessing accounts much greater than is normal.

    Wamu says they have plenty of funding available to them to ride this out and they may have. On the other hand if you like I don’t gamble with your earnings I wouldn’t take that chance. Its business not personal.

  20. cookmefud says:

    wamu was downgraded to junk status. regardless of insurance by the fdic, why would you want to keep your money in a bank that’s considered to be junk?

  21. nybiker says:

    So, if WAMU goes BYE-BYE, does that mean the theater in Madison Square Garden gets to go back to its original name? Gee, that would be nice. IIRC, it used to be the Theater At Madison Square Garden. But I suspect the good folks at MSG would probably just find another john to sell the naming rights to.

  22. It’s the inevitable ellipses in these articles that alarm me. “You’re money is insured. You will get your money back…eventually.”

    What if you live paycheck to paycheck like many 20-somethings for whom college wasn’t the end-all?

  23. hellinmyeyes says:

    The bottom line is don’t panic. It only will make things worse. Rumors about banks failing only cause banks to fail because all the depositors clean out the banks’ cash positions. Good cash positions are exactly what keep banks from failing. The rumors are self-fulfilling prophecies, which is exactly why FDIC keeps potential failures secret.

    If you don’t need to pull the money out in the next month or so for something specific you already had planned before you heard this news, then don’t withdraw. Let the bank work things out. The worst that can happen (if you’re in for <= $100K) is that you’ll have to wait in line to get your money if the bank folds.

    • KSPRAYDAD says:

      @hellinmyeyes: And while I’m waiting in line my Mortgage, Loans, CC are due and my family needs to eat…why bother with that when you can move to a new bank now and avoid any hassles.

  24. tz says:

    First you confuse solvency and liquidity. If WaMu has the assets, the FDIC may swoop in, but WaMu won’t even be necessarily closed. They can get loans on their assets (assuming the loans are good, just difficult to sell on short notice) and will survive the liquidity crunch. If they are already insolvent, they will close. If not today, then later.

    Do you trust those people who gave us the Mortgage crisis to give you advice about what to do when your bank might be failing?

    Find a nice credit union – one that does loans the old fashioned way by demanding a pay stub and 20% down – with low fees and friendly service and go there.

    Or is our host going to guarantee personally when the rent payment is due tomorrow and the ATMs don’t work and there is a long line around the block?

    He who panics first, panics best. My 2x inverse short funds are doing quite well.

  25. MumblesFumbles says:

    Hey if it’s WaMu’s turn, its WaMu’s turn. Woohoo! Let the scumbag banks fail.

  26. metsarethe... says:

    Places I’d go, HSBC, Chase, B of A

    Places I wouldn’t go Wachovia, WaMu

  27. NTC-Brendan says:

    I agree with Ben; no panic and no withdrawal runs. Our family has a number of accounts at Wamu. We are not scrambling for the exits at this time.

    I did take the precaution of pulling our “Emergency Fund” (around 4-6 months of expenses) out in cash. I have some confidence that Wamu will rebound and combined with the confidence that the FDIC will insure our deposits I am not going to engage in actions which I believe would compound a problem, such as closing multiple personal and small business accounts.

    Better safe than sorry as far as the emergency fund goes; even with FDIC insurance it could take days or worst case scenario weeks to get things sorted out and I will not be the unlucky one without a chair when the music stops.

    Good post Ben and solid insight.
    -BJM

  28. MaytagRepairman says:

    I have plans to yank my account. The local credit union offered me a much better deal on a mortgage a few months ago and pays better interest on their checking account. Yeah, they don’t have anywhere near as many ATMs or branches but with debits cards and cash back at POS I don’t feel as tied to bank branches and ATMs as I did maybe a decade ago.

    The one positive thing I have to say about WAMU around here is that often when the lines are long employees out in the cubicles don’t hide. They get off their rears and work the lines.

  29. oneliketadow says:

    After all the posts here about WaMu, I say a bank-ending run is exactly what they deserve. Go find a credit union.

    • MissTicklebritches says:

      @oneliketadow: it doesn’t just affect the top policy-making executives, it affects lower level employees and small customers, too. Have you ever thought about that? Doesn’t seem so.

    • sleze69 says:

      @oneliketadow: Yeah, I am shocked about that too. Ben, how many negative Wamu posts has Consumerist run? You still have a WaMu account?! Weren’t they a favorite to win the worst company award for several years?

  30. kateblack says:

    Gosh, I just wanted to leave them over their choice to force RFID chipped debit cards on their customers and generally horrible customer service.

    I went to a WaMu location in Manhattan and told them I’d be going out of town and would be making some purchases and wanted to give them the low-down so that their fraud department didn’t cut off my card mid-trip. So what do they do? Cut off my card during my trip.

    I’m shopping for a new bank.

  31. P41 says:

    Should be some bumps up in their percentage rates soon, to get more cash. Unfortunately, WaMu refuses accounts requiring two signatures. Hopefully their building solvency problem makes them rethink the wisdom of telling $100k depositors to scram.

  32. smokinfoo says:

    What exactly is bad about a bank that can’t manage itself failing?

    The business from the failed bank will most likely be transferred to local banks and credit unions.

    Win/Win

  33. I’ve been doing business with WaMu for about five years now, and have about 80% of my money with them. I like ‘em quite a bit, actually, and I’d be sad to see them go. That leaves me with Bank of America…

  34. Xerloq says:

    Credit union here I come.

    I just got notice that they’re going to charge a $5 check fee to non WAMU customers I write checks to.

  35. speedwell (propagandist and secular snarkist) says:

    I’m in Houston, and my power just came back on. Eighty percent of the city or more is still without power.

    I bank with WaMu and have been thinking about changing banks for a long time. But right now most of the local credit unions are out for the count. And I’m going on an overseas business trip for six weeks starting Friday (three paychecks). I really do not have time for this.

    Do you think I’ll be ok with WaMu until I get back?

  36. azntg says:

    Almost a year ago, I noticed that the staff of my local Washington Mutual branch suddenly “lost” their friendliness. Faces of the employees looked somewhat strained and tired. They stopped doing some basic courtesies without asking questions, for further ID, etc. (making quick routine procedures into a serious hassle and cumbersome process). Turns out that it wasn’t limited to my local branch. I made similar observations with other “preferred” branches (you know, those branches that you happen to stumble upon, with relatively short lines, friendly knowledgable staff, etc.) that I go to.

    I thought something was amiss. Sure enough, shortly after I made those observations, problems with Washington Mutual was starting to surface on the internet. WaMu getting in trouble for not doing much for money laundering. WaMu getting in trouble for slimy practices in lending, etc.

    I started to slowly withdraw or use up funds in a controlled fashion without ever replenishing for diminished amounts (as is my usual practice). I now have marginally over $1k combined in my accounts. I have also made arrangements to change direct deposit for this semester.

    Against the advice of my father, I will not close my WaMu account, but will maintain a “comfortable” token amount in my account. Let’s see what happens from here.

  37. mac-phisto says:

    appreciate the advice, but i think most folks are less concerned about depository operations & more concerned about stock right now. whereas FDIC has done an impeccable job of mitigating problems at commercial banks, the fed has been largely unsuccessful in its attempts to stop the dominoes from falling.

    right now, it sucks to be an investor – especially a small-time investor. when do you cut your losses? it’s hard to say these days. the talking heads tell you to hold onto your investments – don’t do anything rash! don’t sell at discount!

    i bet some investors wish they had taken the $7 for fannie mae when they had the chance 2 weeks ago (s&p’s HOLD position on fannie mae 0829 less than 2 weeks before they delisted them)–>
    [uk.biz.yahoo.com]

    1000 shares = $5870 lost in those 2 weeks.

    or even better, s&p’s HOLD position on lehman bros, merril lynn & washington mutual as of 0911–>
    [www.businessweek.com]

    if i had 1,000 shares of each – LEH, MER & WM on thursday & i sold today, i lost about $10,000 (luckily, MER is only down a few bucks & if i sold at the day’s high, i might even have made ~$200 there, WM is holding steady ~$2, but LEH, as we all know, went down the pooper).

    not a whole lot of winners here (enjoy the ride):

  38. Norcross says:

    FDIC or not, considering the hassle of setting up direct deposits, on-line bill pay, getting new cards, checks, etc. it would be worth at least determining WHERE you’ll go if / when WaMu fails.

    That being said, I’ve got a credit card with them. So if / when they do fail, who do I owe the money to?

  39. kazoni says:

    Many have said that the perceived panic of WaMu going down will take them down. What is a bank’s primary purpose? You give them your money to hold on to in exchange of them using it and giving you a small percentage back for the privilege. WaMu is starting to fail. Why keep your (emphasis on your) money there regardless if it’s insured. As with any other insurance, you would have to swim through the paperwork before you saw any of it back. Why give a business, who looks like they could go under, your assets? People will look out for their own self-interest, it’s human nature. WaMu lost their image that they were capable of maintaining customer’s money, thus they are going to be polishing brass on the Titanic before long. It would be the same for any other bank in their position.

    Think of it like a local doctor not being able to adequately care for everyone. If people lose faith in his ability to make people better, game over.

  40. The administration would pull out of Iraq, rent out the White House to Puff Daddy, and pimp out the Bush Twins and Sarah Palin to Kim Jong Il and Hugo Chavez tomorrow if it meant keeping the FDIC properly funded.

    Having a bank fail and the FDIC unable to pay off depositors would result in everybody losing faith in the ability of the dollar and US economy (remember, the dollar is backed up by the products of the US economy) and a worldwide financial clusterfuck of epic proportions. Depositors would withdraw money from banks en masse, the dollar would tank, which would bring down many other currencies, a global depression would be triggered, cats would chase dogs, etc, etc.

    Probably the only thing worse that could happen would be if the US defaulted on its debt obligations.

    • ChuckECheese says:

      @Crim Law Geek:

      Probably the only thing worse that could happen would be if the US defaulted on its debt obligations.

      In which case say howdy to your new overlords at the IMF. We’ll be like every other 3rd-world debtor nation, only chubbier. For awhile anyway.

  41. fhic says:

    I just renewed a CD at WaMu today. APR 4.89% for a yield of 5.00%, term 13 months. Best deal I could find, and 2% better than anything BofA (my other bank) was offering.

    I had an account at a bank that failed in the S&L crisis in the 80’s. The FDIC took it over, ran it for a week, and sold it to BofA. I had no access to my money over a weekend, but at that time banks weren’t open on weekends anyway. Checks I wrote during that transitional weekend all got cashed.

    If y’all need something to worry about, bank failures are probably the best thing to panic over. As Crim Law Geek points out up-thread, “The administration would pull out of Iraq, rent out the White House to Puff Daddy, and pimp out the Bush Twins and Sarah Palin to Kim Jong Il and Hugo Chavez tomorrow if it meant keeping the FDIC properly funded.” I’m no Bush fan, but even he wouldn’t willingly cause the next worldwide depression.

    • Brontide says:

      @fhic: “I just renewed a CD at WaMu today. APR 4.89% for a yield of 5.00%, term 13 months. Best deal I could find, and 2% better than anything BofA (my other bank) was offering.”

      It’s called risk/reward. The more risk of the bank collapsing the higher rate of return they have to offer. Now that their debt is listed as junk status deposits will be one of the last ways the bank had to raise capital.

      Because CD’s are insured by the FDIC I expect a mid-week letter informing them they are no longer allowed to accept “Hot Deposits” such as these high-yield CD’s. This letter will be the death blow for a Friday closure.

  42. Good responsible post, thanks for writing it.

  43. narf says:

    I’m in the group who WON’T be pulling money out of my WaMu acct. – it will only add to the chaos. I have other accounts elsewhere anyways if I needed $$ in the interim.

    I haven’t noticed a decline in friendliness around here in the past years … only that quite a few seem quite busy and tired. Unlike BoA, WaMu hasn’t screwed me over as has been as good as Home Savings before … and Fidelity Federal before that … and Coast Federal before that.

  44. Ein2015 says:

    As another WaMu customer, I vote no. If you haven’t had problems with them, then don’t worry, you probably won’t.

  45. wow… that’s funny…

    I’m working at gamestop, and we got an e-mail, stating that the company is closing all accounts with WaMu. We couldn’t figure out why, but I assumed because they were pretty much fucking up our deposits every day, their lines were too long, and that the customer service on the business line sucked.

    Thanks Consumerist, now I get to tell people how GS is really trying to hold on to their billions by switching.

  46. jblack says:

    Keeping all of your (nest)eggs in one basket is an unnecessary risk. Diversification of assets is always a good idea, so that regardless of what happens, your risk is limited.

    You should have, at the minimum, two spare bank accounts, both with enough money to cover 1 month of expenses, each. If you use billpay, you should also set those up at your two backup banks as well.

    Doing both of these things will protect you from long lines any problems that the FDIC may have while transitioning the bank to new members.

    As the coming banking problems worsen, you can spread out your savings more evenly, giving you increased flexibility.

    It’s your money; never forget it.

  47. Tallanvor says:

    When it comes to banking, I listen to my father since he’s been in the industry since before I was born. A couple of months ago he told me he thought WaMu was in a horrible position and was probably the largest consumer bank (as opposed to the investment banks like Lehman Brothers and Bear Sterns) likely to fail this year.

    If the credit rating groups have downgraded their stock to junk status, there’s no way in hell I would recommend that anyone keep their money there. Sure, if they fail, the FDIC will make sure you get access to your funds as quickly as possible, but that won’t be overly reassuring to you if you have to spend a couple of days waiting for your money.

    I’m not an expert, but I’m glad I don’t have any money at WaMu, and if I did, I’d be finding a way to get it out of there ASAP. Granted, trying to do that from Norway could get tricky, but if I can maintain bank accounts in 3 countries, then I think I could find a way.

  48. Diet-Orange-Soda says:

    What about credit card accounts? Is there any reason to worry about them?

  49. tankertodd says:

    mugsywwiii: actually pulling your money out now is a better choice than hoping the bank won’t fail. It’s a corollary of the old joke about not two guys surprising a bear in the woods. You don’t have to be fast enough to outrun the bear, but fast enough to outrun your buddy.

  50. majortom1029 says:

    Well I am glad i switched to chase. I switched to chase after the account guy at chase told me there were PROBLEMS at wamu and that I should switch. I was thinking about it anyway since wamu was doing some pretty sneaky stuff with my account.

    I guess the guy at chase was right .

  51. dallasmay says:

    “First off, you’re FDIC-insured up to the first $100,000. You will get your money. “

    You might check that fact again… The FDIC has been loaning mony out to banks like crazy for the past year or so, and there are a lot of people talking about the FDIC not having enough cash on hand to fulfill obligations if a bank like WaMu goes down.

    • mugsywwiii says:

      @dallasmay: More FUD. The FDIC is not going to run out of money. Congress would not let that happen. We don’t WANT congress to have to act, so the logical course of action to prevent that is to not cause banks to fail unnecessarily with a run. IF WaMu fails, you WILL get your money within days. That is a fact. You can take that to the bank.

  52. dave says:

    If WaMu fails, the FDIC will go in on a Friday after the bank closes and do one of two things. Turn it into a federally sponsored bank (IndyMac became Indymac Federal Bank), or allow another bank to buy its customer base and deposit base. This includes credit cards, mortgages, savings/checking accts, CDs and anything else you may have. You will have access to your money by writing checks and ATM withdrawals will still work because your account and routing numbers tell the bank cashing your payment checks exactly where your money is.

    Taking your money out may be prudent in your situation – to each his own, but it is absolutely not necessary. The FDIC insures accounts up to 100K, 200K for joint accounts. Just make sure that none of your accounts have more than the insurance limits, that is how people lost money at IndyMac, et al.

  53. CaptRavis says:

    WAMU has a 6 month ‘pass’ with the OTS smackdown and the termination of Kerry K.,so get some of that high yield short term CD action.

  54. evilmregg says:

    So since my mortgage is through WaMu, then if they go belly-up then I don’t have to pay it anymore, right? I know, I know. But a guy can dream.

  55. JohnMc says:

    Ben are you serving your own self interest here? If the Indy bank failure taught folks anything it showed that even with FDIC coverage you may not have access to your funds except at the $400 window of the atm. Some people are STILL waiting to get access to their accounts to close them at Indy.

  56. blackmage439 says:

    “The worst thing for WaMu would be if a run on the bank started, vaporizing their liquidity. Then people worried about the worst happening would be in fact causing it.”

    And that is the exact problem with this country right now. Those squealing pigs at Wall Street are running for the hills, usually on very bad and incorrect information. Look at United. Their stock plummeted and harmed the company, all based on false and outdated information and panicky investors who didn’t bother doing their homework.

    Please, don’t pull your money out of the bank. You’ll only be part of the problem. (Although, I find it surprising that Ben has his money in WaMu, even with all their failings published on The Consumerist…)

  57. johnnya2 says:

    Why would protecting MY money be detrimental to you. If WAMU can not handle a “run” on the bank then I suggest they made bad loans or are not liquid enough in todays market. Quite frankly that is not my problem. No customer owes them anything. If they go under a new bank will arise, or the strong smarter bank will take over. I have no problem watching incompetent companies fail. It is a good thing. Unfortunately we allow them bankruptcy protection and the high level execs walk away with 100’s of millions of dollars (Lehmans CEO for example). I could go on about Kmart, NWA, United, Delta, Delphi. If their business models do not work anymore they need to make new models. WAMU would lay off or fire a worker if they were overstaffed, and not worry about their future, so why the hell should we care about theirs.

    • mugsywwiii says:

      @johnnya2:
      [www.bloomberg.com]
      “On a more positive note, we recognize that WaMu’s holding company liquidity position is currently solidly positioned to meet all of its fixed obligations through 2010,” S&P said. “The bank is operating with adequate capital positions from a regulatory perspective and has demonstrated funding resilience as the deposit franchise has remained stable.”

      • KSPRAYDAD says:

        @mugsywwiii: S&P maintained investment-grade ratings on Enron until a mere three weeks before it melted down. The rating agencies were “not connected at the right level,” says Armand Ursino, a vice president at JP Morgan Asset Management in New York.

        [findarticles.com]

        And I’m going to trust S&P now?

      • johnnya2 says:

        @mugsywwiii: Then why does it matter if I decide to do what I want with my money? If they have such a strong position they have no need to worry about a so-called run. If they fail, OH well, sorry to see ya go

  58. psykomyko says:

    If WAMU goes under, the FDIC’s funds would be wiped out. But they’ve already set up a plan to borrow from the Treasury Dept if that happens:
    [www.forbes.com]

  59. Mattlar says:

    I had a WAMU account for many years, and I was really happy with them. I only closed it last year because there are no branches in D.C.

    Unless you have more than $100,000 in your account, don’t worry. Your money isn’t going anywhere. If you have more than $100,000, move the difference to another bank. If you’re really worried, keep enough cash to get you through a month or two. Pulling all your money will only make matters worse. It will make it more likely that the bank will collapse and you’ll have to wait for FDIC to step in.

  60. jswilson64 says:

    I disagree – IF you have more than $100,000. I wouldn’t leave a cent of non-FDIC-insured money in WaMu at this point.

    But for anyone wanting to see them fail, I have to admit: for all the nightmare stories posted about them, it would be kind of sweet to see them brought down by their own customers.

    • ottergal says:

      @jswilson64:

      So what do you do if you have more than $100K in one bank? I was planning on buying a house this year until I found out that the company I work for is being bought and I may be being laid off in the next year or so. So I’ve got some savings, etc, stacking up.

      I’m with BofA (and say what you like about them, I haven’t had issues) but now I’ve started to think about what happens with amounts over FDIC limits. I don’t really want to manage multiple accounts, but I could throw some savings somewhere else to get under limit, I suppose. Just a tangent.

  61. Wormfather is Wormfather says:

    No, no, no, Ben you have it all wrong. Short the stock then start a bank run. Read it all in my new book:

    “How to Scam the American Financial System for Fun and Profit: Forward written by Angelo Mozilo

  62. ianmac47 says:

    This is only a problem if you aren’t the first person to withdraw your money. So yeah, the rest of you shouldn’t do that.

  63. mrgenius says:

    good banks don’t have their credit downgraded to junk… the way I see it, let bad banks fail. I’d rather pay for the inevitable borrowing by the FDIC as a taxpayer than bailing out one more craptastic company.

  64. jdmba says:

    I pulled my money yesterday. I doubt the fed will bail out the largest S&L, and I don’t particularly want to deal with it. I do not really think my actions will make a bit of difference to the worlds largest S&L, but I don’t see any reasons to have to put up with the delays and FDIC. Of course, my checks haven’t yet cleared in the new bank, so I remain in the WaMu pool. Maybe tomorrow.

    I am now in the midst of changing all my direct withdrawals for utilities, mortgage, etc. It is pure hell. It is the reason I never moved earlier. Some companies/utilities require you to mail them a voided check, some require a faxed form, some let you simply do it over the web, some require you to call from your home phone only, etc.

  65. sirellyn says:

    “You will get your money” isn’t quite accurate. Yes you will. Eventually. If thats your only bank, I would highly recommend you have a month of spending cash.

  66. P_Smith says:

    First off, you’re FDIC-insured up to the first $100,000. You will get your money.

    That statement presumes the FDIC is capable of insuring it. It wouldn’t surprise me to see complete collapse of the US financial system and a worldwide depression by January.

    • Orv says:

      @P_Smith: If the FDIC insurance fund runs out, it will be bailed out. I don’t think there’s any question about that. A taxpayer bailout isn’t a great scenario but you’d still get your money.

      On the other hand, if you’re really expecting the complete collapse of the U.S. financial system, the FDIC is not your main concern; you’d better be stocking up on gasoline, bottled water, and toilet paper in your underground bunker.

    • Erwos says:

      @P_Smith: The government can always print more money. Worst case, you’ll see serious inflation.

      Actually, I have substantial cash on hand, so a depression might not be so bad if I can keep employed.

  67. Corporate_guy says:

    The fact is, everyone with money above 100k has to pull out. That alone might be enough to make them fail.

  68. vmspionage says:

    I don’t know about you, but I’m pulling all of my cash out of my WaMu credit card right away.

  69. UnnamedUser says:

    Yeah, right. The FDIC will step in an your money is safe. Sure.

    Recent reports suggest that the FDIC doesn’t have any money with which to make good on their obligations. — Pretty much like Lehman Brothers, AIG, Fanny Mae, Freddy Mac, and others.

    If you want to trust “your government” go right ahead. I don’t want to say I told you so.

    • nequam says:

      @UnnamedUser: Run, Chicken Little, Run!

    • wishlish says:

      @UnnamedUser:

      Um, the FDIC has enough funds to cover just about any bank failing. They may have to tap the Treasury if it gets REALLY bad, but I haven’t seen any indication that we’re looking at a failure of the FDIC any time soon.

      • Ass_Cobra says:

        @wishlish:

        It’s the train you don’t see that usually ends up hitting you.

        I’m not going to agitate and say that the FDIC is in jeopardy either, however there have been some substantial failures thus far and it would appear that we are in for a few more. Why take the risk if you don’t have to by staying with a bank that is widely believed to be walking dead?

  70. wishlish says:

    I’m actually kind of surprised that any active follower of the Consumerist actually *has* a WaMu account…

  71. krom says:

    George Bailey would be proud of you, Ben.

  72. frodo_35 says:

    The new most popular savings option. Bank of mason jar located somewhere in your back yard.

  73. Murgen says:

    Well, if you want to wait 4-9 YEARS to get your money back through the FDIC with no interest be my guest to leave you money with WaMu.

    We pulled out $175,000 and went to Chase. Going to invest that in paying off our home. At least that is somewhat inflation proof and I have a bad feeling inflation is going to go NUTS as the US Treasure starts printing money like mad to pay for this mess.

  74. doireallyneedausername says:

    Banks rely on deposits in order to lend and borrow money — a basic function of monetary policy and part of the money multiplier effect ([www.investopedia.com]). For every $1 that you pull out of the bank, you are actually (in effect) pulling $10 out of the economy. Imagine this on a larger scale. By panicking, you’re actually CAUSING the “worst case scenario” to happen. Don’t pull your money out, its FDIC insured. You’ll get your money back in short order if WaMu does fail.

  75. jblack says:

    ‘Your money is perfectly safe, so do not take it out of this bank so that you do not participate in a run.’

    If you guys believe what you’re saying, then you shouldn’t be the least bit worried that I’m taking my money out. =)

  76. RandomHookup says:

    When I see headlines about “Yanking Your WaMu” I start to wonder if I have wandered in Fleshbot by mistake.

  77. PriusGuy says:

    I have been a Chase customer and I have been a Wamu customer. I like everything about Wamu and dislike everything about Chase. Wamu will be around a long, long time if their customers don’t start a run on the bank. If you have an account with Wamu, stay there. Your money is safe. Stay with Wamu and they’ll be there for you.