Mother Of All Bank Runs

The Professor is Bloody Smart, this is what i expected to happen around middle of DEC 2008 which will resulted into a very messy problem. I never expected him to figure this out.
However this is what i think. I do not gain any profit from it.

From:Nouriel Roubini

I will elaborate later today on the rising risk of the "mother of all bank runs", i.e. the risk of a run on the uninsured deposits in the US banking system. In Q2 of 2008 the FDIC reports $4462bn insured domestic deposits out of $7036bn total domestic deposits; thus, only 63% of domestic deposits are insured. Thus $ 2574bn of deposits are not insured.


Given the risk that many banks – small, regional and national – may go bust (as even large ones such as WaMu and Wachovia went recently bust) there is now a silent run on parts of the banking system. Deposit insurance formally covers only deposits up to $100000. Thus any individual, small or large business and/or foreign investor or financial institution with more than $100000 in a FDIC insured bank is now legitimately concerned about the safety of its deposits.

Particularly at risk are the cross border short term interbank lines of US banks with their foreign counterparties that are estimated to be close to $1 trillion. I will also discuss later today the appropriate emergency policy responses necessary to prevent this "mother of all bank runs" (i.e. the need for a temporary blanket guarantee on all US deposits combined with a rapid triage between insolvent banks that should be quickly closed and distressed but solvent – conditional on liquidity and capital injections – banks that should be rescued).