November 21, 2008 1:27PM
Tracking Runs on a Bank
By Ray Hennessey
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One of the big lessons we've learned during the current financial crisis is that it's darn hard to know when there's a run on a bank. In England, it was pretty clear when Northern Rock was in trouble, because we saw lines twisting around blocks.
But so many folks here bank electronically that it makes seeing a run on the bank tough. Wachovia execs were shocked to see all the deposit outflows on the Friday before the bank needed its own rescue.
That has contributed to the nervousness over many of these bank stocks, Citi front and center. In the good ol' days, you could stand outside a branch and watch capital flee. Now, it's guesswork, rumor and scuttlebutt, all of which typically feeds on each other. A bank could be undergoing a run and no one outside of that bank sees it.
And that remains a scary proposition for anyone investing in bank stocks nowadays.
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