Old Fashioned Bank Run Finishes IndyMac

IndyMac may have been rotting on the vine, but a bank run brought the bank down for good. Some blame Senator Charles Schumer for causing the panic.

On June 26th, Schumer wrote a letter exposing IndyMac's weakness, and in the following days customers drained $1.3 billion in assets. Regulators are fighting about who's to blame for the severity and speed of IndyMac's demise. Was it bound to happen, or did Schumer create a panic?

The bank run is interesting because many customers did not need to do anything rash. They would not have lost money or been inconvenienced by simply sitting tight. However, panic is contagious, and people took on the task of getting money out as quickly as possible -- even though they have nothing to lose.

Of course, a bank failure is stressful. Before you do anything rash, educate yourself. Find out if you're covered by FDIC insurance, ask your bank about your risks, and do something to manage your risks.

Further reading:

• How Bank Runs Work, Why They Happen