Jim:
If Michael A. in Seattle was surprised by his little run-in with the FDIC [1], I urge him and others to research what happened in Texas during the S&L [2] crisis. That’s within fairly recent memory, just about 20 years ago, not like the Great Depression [which has faded from memory. And this was when the entire rest of the nation’s banking system was largely intact but the S&Ls in Texas (and a few surrounding states) caused all the fuss.
Common problems included:
1. Inability to get at checking or savings accounts for months at a time.
2. Inability to get employers to immediately turn off Direct Deposit, resulting in some paychecks simply vanishing forever.
3. Inability to pay bills even though technically you had money, at least according to the FDIC [1]. (This caused numerous foreclosures despite the person never having missed a payment before and having the cash but unable to access it.)
One common result of #2 above in Texas is a higher than usual refusals to take Direct Deposit. I don’t take it because of what I saw happen then. Recently on a trip to my local bank, a manager walked by as the teller was servicing my request and saw that it was a real check. She immediately suggested I get Direct Deposit. I replied “The S&L debacle left many scars.” She looked at me then smiled, nodded, and went on her way. She knew that arguing with me about it was pointless.
On another point, a fellow I know was recently cleaning out his grandmother’s house after her death. Everywhere they looked they found cash ranging from ones to fives to tens to twenties. It was in drawers, hidden in seat cushions, etc. He knew she did this and he always thought she was off her rocker but in the last year he’s changed his attitude. Now he says “I think I understand why she didn’t trust the banks.”
There’s a sea change coming in American attitudes. That sea change is going to worsen the economy as people decide spending is not the sole purpose in life. And no bailout is going to change this. Life in these United States is about to become far more frugal, one way or another. – Dave R.