Word: banking
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...Doesn't sound like much, but let the language sink in for a second. The fiscally conservative organization charged with guaranteeing American bank deposits found that, for the first time ever, the economy of the United States of America was at risk. Not just one bank, but the whole financial system. If Wachovia failed to open, or did open but blocked depositors from continuing the run on cash that had begun the previous Friday, panic could have spread to other banks, big and small. The crisis could have become a financial catastrophe in a matter of hours...
...FDIC has a clear message for Americans who are beginning to awaken to the size of the problem: Don't panic. Banks will fail, but it is highly unlikely that depositors will lose their money. The FDIC now guarantees up to $250,000 in individual deposits at the banks it insures. And by law it gets its hands on a failed bank's assets before any other creditors do. FDIC chair Sheila Bair is eager to talk about how no insured depositor has ever lost a penny of his or her deposits...
...experts in and out of government expect bank failures to accelerate. Banks that are too big to go under, like Citibank and Bank of America, could fail but will stay alive in one form or another - through a bailout or government-backed sale, for example. But plenty of medium and smaller banks are going to disappear or be divvied up by creditors. And the longer Paulson's new capital-infusion plan takes to get up and running, the higher the likelihood of failure will...
...That worries economists, as bank failures exacerbate the already bleak situation by decreasing the amount of lending in the system. That's one reason most now predict the country will sustain a protracted recession even if it manages to avoid the kind of systemic risk the FDIC feared a disorderly and public Wachovia failure might have brought...
...bank failures are likely to keep worrying the markets too. Some traders were hoping for two potentially positive events this weekend, after the worst week in the history of the New York Stock Exchange came to a close on Friday. The first was that the meeting of the G-7 - whose finance ministers and central bankers were set to convene in Washington - would unveil details of a plan to inject capital into banks worldwide. The second was that the G-7 would commit to a coordinated guarantee of interbank lending...