Run On Banks Begins
In response to reports of a shaky future for Countrywide Financial, people with money deposited there are crowding into the bank to withdraw their funds.
The L.A. Times has the story of the mass withdrawals plaguing the Southern California bank. While the Federal Deposit Insurance Corporation (FDIC) insures up to $100,000 per account per institution, many depositors in Southern California, where million dollar homes are common, have much more than that in the bank.
To handle the crisis in its mortgage lending, Countrywide has borrowed more than $11.5 billion dollars which no doubt is helping it handle withdrawals as well. There are fears that Countrywide will soon seek bankruptcy protection.
The demise of Countrywide will put even more downward pressure on the housing market in Southern California as one of the biggest mortgage lenders could leave the market.
As the banking crisis spreads, could we see the crisis widen? Is this the start of another depression?
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