BANK RUN: $114 Billion Withdrawn From Big US Banks
More than $114 billion exited the biggest U.S. banks this month, and nobodyâs quite sure why.
The Federal Reserve releases data on the assets and liabilities of commercial banks every Friday. The most current figures, covering the first full week of 2013, show the largest one-week withdrawals since the Sept. 11, 2001, attacks. Even when seasonally adjusted, the level drops to $52.8 billionâstill the third-highest amount on record, and one for which bank experts and analysts were reluctant to give a definitive explanation.
The most obvious culprit is the expiration of the Transaction Account Guarantee program, the extraordinary federal effort to shore up the countryâs non-gigantic banks during the 2008 financial crisis. Big banks were considered âtoo big to fail,â while smaller ones were vulnerable to runs. The TAG program backstopped their deposit bases by temporarily offering unlimited insurance on money kept in non-interest-bearing accounts. That guarantee ended on Dec. 31, so a decrease in deposits would be expected first thing in January.
But hold on: The Fed data show $114 billion leaving the 25 biggest banksâabout 2 percent of their deposit base. Only $26.9 billion left all the others, equivalent to 0.9 percent of their deposit base. Experts had predictedÂ that the end of TAG would hurt the nationâs small banks because the big ones are still considered too big to fail. âI think [customers] are going to go back to the mega banks,â the head of a regional bank in Bethesda, Md., told The Washington Post in December. âTheyâve been assured by the government that mega banks are too big to fail. Itâs a horrible, bad, poorly-thought-out situation.â Small banks fearfully lobbied the Senate to extend TAG, with analysts telling the New York Times that they expected $200 million to $300 millionâyes, with an mâto move from affected accounts into money market funds or elsewhere.
So if the missing $114 billion is not the result of the TAG program expirationâor at least not all related to TAGâwhatâs going on? Paul Miller, a bank analyst with FBR Capital Markets, cautions against reading too much into the Fedâs weekly data. âItâs a noisy database,â he says. Among large U.S. banks, there have been movements of greater than $50 billion (not seasonally adjusted) during 107 different weeks since 2000. Itâs not uncommon to see 11-figure swingsâthat is, tens of billions of dollarsâfrom positive to negative, or vice-versa, one week to the next.