Meanwhile, in banking reserves news...

[solarbird]

Over at RGE Monitor, down in the comments of the linked post, a reader notices this graph (last updated December), this graph (same notation), and this table, last updated January 3^rd through January 2^nd. The graphs are seasonally adjusted, so look at the seasonally-adjusted table for comparison purposes. To have the graphs reflect the newest data in the table, take those large downward spikes at the ends and, roughly speaking, double them.

The data basically show that the major banks are having a reserve crisis, and that most of the liquidity injections into the system (including a surprise US$30B auction just recently) are going in no small part to keep the banks from failing to meet reserve requirements and getting shut down. This would presumably be part of all those CDO (and SIV and etc) writedowns. The question needed, I suppose, is how much will these banks need, as well as how much can the Fed throw at them credibly?

Comments

[aerialscribe.livejournal.com]

Is it time to start stuffing cash into the mattress?

[solarbird]

I would say it's not at all unlikely that a major bank could fall over because of this. Citigroup is in deep hurting. WaMu isn't in great shape either. If this happens, the $100,000 FDIC insurance will kick in - that's a Federal guarantee - but there will be inconvenience. Reports from people around for the Savings and Loan debacle of the 1980s - where a lot of S&Ls failed - say that settlements took weeks and in some cases months, and that caused some real hardship.

[aerialscribe.livejournal.com]

Hmmmm.
Last year I changed my bank to WAMU because I was sick to death of the crap Wells Fargo was giving me.

I've been incredibly happy with WAMU, their customer service has been excellent, they've gone out of their way to be helpful to me, they haven't made any mistakes, and so on.

I only have basic savings, checking, and a business account, all with small balances....but still....

I'd hate to suddenly find out I didn't have access to my money.....

[solarbird]

Well, the thing to remember is that the FDIC insurance will kick in. So in the worst case, you're looking at annoyance and inconvenience and possibly stress - but not doom. And you'll keep getting paid by your job, tho' you'll maybe need to know to turn off direct deposit, if you have that.

Really, the bank I'd be most afraid of right now is Citibank, because part of Citigroup, and you're not (I imagine) involved with them. The difference between Citi and WaMu's conditions is not trivial. If the Fed manages to keep CitiZombie staggering along, they really should be able to keep anybody afloat.

Basically, there is a chance of a systemic shock here, and that chance is much higher than it has been in a long, long time, but is still pretty low, all in all.