Bye Bye Banks and Wall Street

Alex · 09-29-2008, 01:00 PM

They could halt trading but that would be a disaster beyond words. Nothing makes people want to remove money from a marketplace faster than being told that they may not be able to get it out when they want it.

That's what brought down WaMu. WaMu's problems were significant but they were not immediate in nature. Until people began getting worried and withdrew $16 billion from deposit accounts in a week. Then once WaMu was out of the way the press could focus on Wachovia and the fear moved to them.

The same would happen if the markets were closed. As soon as they re-opened there'd be a huge rush to withdraw money from them in case they get closed again. It is one thing to temporarily close them in response to an external crisis such as 9/11 where a cool off can work. People don't know what the implications are and react out of blind panic that can cool down with a day or two consideration (plus, the infrastructure literally had to be checked).

But if the markets are closed simply to prevent people from responding to events in the marketplace then you'd see a global sell off. It would become a self-fulfilling prophecy of humongous proportions.

wendybeth · 09-29-2008, 01:22 PM

The more immediate impact on the public is already happening: no money to lend = no home sales or opportunities to purchase bargains, unless you have a substantial amount of cash reserve and/or someone willing to go private contract. Home equity has plummeted, especially in the markets that were most inflated; here in Spokane home values did not rise as rapidly or as high as elsewhere, so we are still sitting pretty good in that area. Our home is still worth what it was last year, and we haven't tapped into the equity very much so we have some wiggle room. We also locked into a 5.5% rate two or so years ago, so we're off that ARM that could have cost us a fortune. We don't have a lot of stock, but we also don't have a lot of debt- I'm with everyone else that lives paycheck to paycheck. In the long run we won't feel the hurt as bad as some. (I hope).

09-29-2008, 01:00 PM	#1
Alex . Join Date: Feb 2005 Posts: 13,354	They could halt trading but that would be a disaster beyond words. Nothing makes people want to remove money from a marketplace faster than being told that they may not be able to get it out when they want it. That's what brought down WaMu. WaMu's problems were significant but they were not immediate in nature. Until people began getting worried and withdrew $16 billion from deposit accounts in a week. Then once WaMu was out of the way the press could focus on Wachovia and the fear moved to them. The same would happen if the markets were closed. As soon as they re-opened there'd be a huge rush to withdraw money from them in case they get closed again. It is one thing to temporarily close them in response to an external crisis such as 9/11 where a cool off can work. People don't know what the implications are and react out of blind panic that can cool down with a day or two consideration (plus, the infrastructure literally had to be checked). But if the markets are closed simply to prevent people from responding to events in the marketplace then you'd see a global sell off. It would become a self-fulfilling prophecy of humongous proportions.
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09-29-2008, 01:22 PM	#2
wendybeth Nevermind Join Date: Jan 2005 Posts: 7,847	The more immediate impact on the public is already happening: no money to lend = no home sales or opportunities to purchase bargains, unless you have a substantial amount of cash reserve and/or someone willing to go private contract. Home equity has plummeted, especially in the markets that were most inflated; here in Spokane home values did not rise as rapidly or as high as elsewhere, so we are still sitting pretty good in that area. Our home is still worth what it was last year, and we haven't tapped into the equity very much so we have some wiggle room. We also locked into a 5.5% rate two or so years ago, so we're off that ARM that could have cost us a fortune. We don't have a lot of stock, but we also don't have a lot of debt- I'm with everyone else that lives paycheck to paycheck. In the long run we won't feel the hurt as bad as some. (I hope). __________________
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