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!

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

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

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

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.

@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.

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

@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.

@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.

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

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

@metsarethe...: to*

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.

@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.

@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.

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?

@maztec: Days. It takes a matter of days.

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.

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.

@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.

@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.

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.

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.

@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.

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

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.

@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

@mugsywwiii:

Consumerist is a very anti-corporation blog.

@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.

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.

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.

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.

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

@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.

@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.

@mugsywwiii: Yep, 18 billion shoulda held it. Thanks for the clarification.

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: 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.

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

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.

@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.

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

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?

@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.

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.

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?

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.

@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.

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.

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