Friday, 26 September 2008

Wheres my money?

This crisis requires a radical solution - an ethical bank

Consumers are even worried about their bank deposits. Andy Hornby, chief executive of HBOS, admitted in a memo to staff that one of the reasons for merging with Lloyds TSB was that depositors were taking fright at the bank's share price falls and had started to withdraw their money. Before the Northern Rock debacle last September, Britain had not experienced a run on a bank since 1866. But consumers have now become so nervous that some started pulling their money out of Britain's biggest mortgage lender because of short-term volatility in its stock price.
While it may be a rational decision for one person to withdraw their savings from a weak bank, if everyone does it that bank is doomed. A run on a bank also exposes the myth at the heart of the financial system - our money is not there tucked up in an underground vault. Banks are not able to return everyone's money at once and if we do not maintain faith in them, the financial system starts to crumble.

When the runners start running theres nothing the bank can do!

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