Debt Consolidation

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Is Citibank expecting a run on the banks?

Filed under: Banks, Federal Reserve
Tags: , , — Written by: Lyuda
March 1, 2010
By Jakub Krechowicz, Poland via SXC.HU

Protect Your MoneyPhoto By Jakub Krechowicz (Stock Exchange)

Citibank is having an interesting week. First they apparently had two different employees tell a website owner his account was frozen because they found objectionable content on his web page. Now Citibank customers are concerned over a notice suggesting they may have to give a 7-day advanced noticed before withdrawing funds. In a statement hearkening to the bank runs of the Great Depression, Citibank assures customers they do not plan to exercise this right, but would like to note they have it. So what does this all mean?

Firstly, let’s look at the facts. According to Citibank representatives the notice is mundane in nature, and due to their recent deal to change how the FDIC treats some of their accounts. The FDIC is the program that backs banks with government dollars in the event of failure. Indeed the FDIC requires banks to reserve this right dating back to the 1933 crash. The rule is intended so that in the event of a bank run, it’s not simply a first come first serve free for all as to who is able to withdraw their money. Of course Citibank assures there is no chance of a bank run, and they were merely notifying their customers so as to be extra honest.

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