In that tiny little part of my brain that vaguely understands economics, a theory arose today.
There were reports flying around all day saying the FBI had been investigating possible fraud at the collapsed Indy MacBank. No real details. Just rather vague references.
Aha, said my skeptical, economically challenged brain. The feds started the rumor in an effort to counter the threat of more bank runs and more collapses. Everyone knows that bank runs usually start because people start fearing bank runs. It’s the old self-fulfilling prophecy. And we’re teetering on the brink. If one bank has fallen, can the others be far behind?
So rather than fuel the fire, the feds decide to ice it. Plant the rumor that Indy MacBank was already in big trouble and being investigated for fraud. Nothing to do with the current economic situation, you see; it all started a long time ago. No need to worry.
Hey, I warned you. I’m no economist. But I am one helluva cynic.
That’s odd because the report I heard made it sound like the Feds were bailing them out. I’ll never understand that stuff. Maybe I have it confused with another bank. They pop up and go down so quickly, it’s hard to keep track.
Annie
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IndyMac crashed rather suddenly because of a run, and the FDIC took it over to pay off the depositors. Some other unstable institutions have been bailed out (prior to actual failures), and the government says it may step in if necessary to keep Fannie Mae and Freddie Mac afloat. At some point though, the government needs to stops messing with things and let the market find its own equilibrium.
I agree completely. I’m so sick of the government acting like our parents. they need to stick to fixing the roads and protecting borders and things like that.
WC
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Oooo, don’t get me started on that border thing …. !!!!! 🙄