Released: July 28, 2008

How safe is your bank?

Source: Avi Salzman, Business Week

Nothing says hard times like people standing outside a bank demanding their money. IndyMac Bancorp’s (IDMC) failure and the resulting chaos were reminiscent of Depression-era bank runs even if the country’s economic condition doesn’t marginally resemble that era. But in an economic slowdown with few visual reference points—what does a subprime loan look like anyway?—IndyMac’s failure carried a clear message for some: Stick your money under the mattress.

Banks and federal officials have worked diligently in recent days to make images of bank runs vanish. Some banks are now issuing tellers talking points to use to reassure customers that their money is safe, housed by an institution that is well-capitalized. BankAtlantic, a Florida-based regional bank, even sued an analyst after he pegged its parent BankAtlantic Bancorp (BBX) near the top of a list that could be “next” after IndyMac. “A falsehood, when widely circulated, becomes its own truth,” the bank’s lawsuit says.

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