How To Kill a Bank (Part 2 of 3)
A couple weeks ago I wrote a post in response to the nascent "Move Your Money" movement spearheaded by Arianna Huffington. To refresh your memory, her plan was to have people move their money out of the major Wall Street banks and into local community banks. The targeted banks would be Bank of America, Citi, JP Morgan Chase, and Wells Fargo.
I opined at the time that a more effective approach would be to target one of the four banks and completely destroy it, rather than try to inflict the death of a thousand cuts that depository drawdowns might cause (and probably wouldn't). Putting one of the banks out of business would send a message.
To that end, I engaged in a strictly academic exercise by figuring out how I would go about destroying one of the four above banks. I spent many hours, and thought out many contingencies, and finally arrived at a 10-step plan that would not only drive one of the banks out of business, it would also hamstring the Federal Reserve from being able to come to the bank's aid, and it also had provisions for eliminating the threat of government intervention to save the bank.
I actually published the plan for about a half hour on WSO a couple days after I wrote the first post. The response to the plan was immediate, and visceral. The first comment asked if I was an economist for al Queda. I started getting emails and PMs. I got the sense that it might not have been the best idea to put such a comprehensive plan out there, so I pulled it down.
Patrick and I talked about it, and he compared it to my publishing detailed plans for how to build a bomb and then telling people, "But you really shouldn't build it." Since then, however, the emails and messages haven't stopped. Obviously, a few people read it and wondered where it went, and others who didn't read it have been wondering when we were going to publish it.
The answer is: we're not.
However, it is obviously a subject of much interest, and the more Patrick and I discussed it, the more we thought it would make an interesting debate about whether something like that should or should not be available out there, whether it qualified as economic terrorism, what the effect on the overall economy would be if one of the banks was forced out of business by consumers, etc...
So, in broad strokes, the plan consisted of a precisely timed and coordinated run on one of the four banks, the decision on which bank being made at the last moment to disable the Fed's ability to backstop the run, and timed to coincide with November elections so politicians would face immediate sanction if they dared ignore the will of the people and stepped in to save the victim bank.
Assuming that the plan would work (and almost everyone who has actually read it agrees that it would), I have the following questions for you:
- What effect on the overall economy would the sudden closure of one of the four major consumer banks have?
- Is is economic terrorism for consumers to exert their power to shut down a major bank?
- What message would it send to the rest of the world? Would it make other countries more hesitant to buy Treasuries knowing the sentiment of the American people?
- What unintended consequences would occur?
I'm really interested to hear your thoughts on this. Is it the dumbest idea ever? Or is it the rank-and-file American's only hope of dealing a death blow to the ruling class?
Comments
Edmundo Braverman wrote: The
The answer is: we're not.
I am actually very disappointed Ed. Dead serious.
2.Is is economic terrorism for consumers to exert their power to shut down a major bank?
No.
I feel you, Mezz. It was a
I feel you, Mezz. It was a decision I struggled with.
Ultimately, where does the responsibility lie if I were to publish it and people were to act upon it? Of course I fully disclaimed that I had no intention of enticing people to do it, but once something goes viral there's no stopping it.
Would you be willing to put your family at the risk of a potentially severe backlash by exposing the very weaknesses that could be exploited in our banking system? In the final analysis, I wasn't.
The elegance of the plan was its simplicity, and if you make destroying something too simple people feel compelled to do it. Especially if it represents an opportunity for the poor to cause pain to the rich.
You have way too much faith
You have way too much faith in people and collective action. Even if the plan was as simple as everyone go to the ATM and withdraw $200 at the same time - no one would do it, too much effort.
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Freeze those knees, my chickadees!
It seems to me that you are a
It seems to me that you are a bit overestimating yourself. Too easy? This is a massive coordination effort. Have you thought about how to target and reach the depositors of the bank? How you would convince them to act? How much all this would cost? Did you check how many deposits would need to be withdrawn? Do you take into account the FEDs discount window, corporate deposits (can you convince corporations to your plan?), overseas deposits (can you reach the depositors?), logistics of the whole thing (i.e. - what if they turn ATM machines offline, what if they close down branches in time to liquify assets, what if the president announces bank holiday - it did happen in the past)? Really, declaring your plan so perfect and simple that the whole issue boils down to the moral dillema at its heart - strikes me as either naive or arrogant.
But, apart from that, this is a damn interesting 'what if' scenario. Personally I lack the imagination, but for someone more creative - there is a book in there somewhere.
What about a pseudonym and an
What about a pseudonym and an internet cafe?
It's hard to give feedback on the plan without actually understanding it. Maybe a negative advertising blitz, or something that would hurt the credibility of the bank could spur depositors to withdraw. If only there was some scandal to uncover on one of these badboys...
No one would do this. People
No one would do this. People are just too lazy to do this and nobody REALLY cares that much to try and overthrow a bank.
It's like those facebook groups where people ask for numbers.....people barely even respond to those just because they're too lazy.
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"I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
Braverman, You said, "The
Braverman,
You said, "The elegance of the plan was its simplicity, and if you make destroying something too simple people feel compelled to do it. Especially if it represents an opportunity for the poor to cause pain to the rich."
Okay, so you're not going to watch Robin Hood at the cinemas. I get it, but explain what your basis is for the need for destruction. And simplicity? I try to explain basic commercial banking products to the populace and they have great difficulty in comprehending.
If it is really that simple, pitch it to a competing institution and see if you can land a job. Or for experimental purposes, hand it to a bum begging for change. I think you'll find it can double as an ass-wipe.
I still don't think you could pull it off. You've had terrible initial responses to it, so why do you think there will be a great following?
I say you post it again. Especially if you have it saved somewhere. Fear is no reason to keep it secret. I thought this site was all about providing information. We get gossip articles on who-raped-who in federal prisons, but when it comes to entertaining creative imagination... "The answer is: we're not."
Entertain us. I have a feeling we're the only ones who will listen anyway.
"we dont believe u, u need
"we dont believe u, u need more people"
Very interesting, I wish I
Very interesting, I wish I could have read the 10-step plan.
However, I have a question: Do you think if consumers were able to pull their money from the Big Banks and utilize local community banks, wouldn't that give the community banks opportunities to rise, merge, and replace the Big Banks?
I do think there will be an intial reaction; however, ten years later another bank will rise and we will be caught up in this perpetual cycle of Big Banks/Business.
We already have economic separation: the rich getting richer; the middle class; and the poor (working poor).
There has to be enough people in the 2 out of 3 pools to shut down a major bank. The Panic of 2008 was a domino effect with banks closing, mergers, collapse of Lehman, Madoff, etc. I think if a bank was to shut down credit will be tight and rates lowered. I do think countries would be hesitant to buy Treasuries; i think the major banks are a brand to American economy. It may lead to another panic.
I'd like to hear the plan
I'd like to hear the plan first before passing judgement.
Since when is the spreading
Since when is the spreading of knowledge considered "terrorism"?
I say publish it. If you publish it, the information gets out there, and there is a chance that banks can actually prevent something like this from happening. It would obviously take a lot of effort, and Al Qaeda doesn't have the power to pull this off anytime soon. This is exactly like that guy who published an academic paper on how to take down the U.S. power grid...
Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
Banks could prevent it, and I
Banks could prevent it, and I lay out exactly how it can be prevented in Part 3.
In order to prevent it, though, banks have to stop fucking people over, and that just doesn't seem to be a part of the current business model.
Guys, please don't get hung up on the plan and miss the point of this post. I'm merely wondering what you think the effects would be if there were a plan that would work and people decided to crush one of the major banks.
Econ 101,
Econ 101,
Name one good reason why any single person would engage in this behavior, if they knew 39,999,999 people could do the same damage as 40,000,000? Tragedy of the Commons methodology. I can sit back without doing a thing and conceptually I can still reap the benefits of the actions of me peers. Rational consumers will do the exact same thing. Ergo, an insignificant number of people actually do it. Not to mention, if the plan did work, you would screw over anyone who simply didn't feel like participating as their money would not be out of the banks yet.
What is youe problem with the
What is youe problem with the banks? From what i've read of your posts, it seems as if you were betting on banks' demise, and when the govt stepped in you got fucked.
When the government stepped
When the government stepped in, we all got fucked.
Do you really want to win a rigged game? Wall Street has become one big tee-ball league for 5-year olds, where no one keeps score and everyone gets a trophy at the end of the season. There are no consequences for piss poor management and bad business practices any more.
I think a better question is, why don't you have a problem with the banks?
It seems as though no one on the Street has an even passing interest in a free market any longer.
physconomist wrote: Not to
it would never get to that
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Freeze those knees, my chickadees!
The effect of FDIC insurance
Agreed, SCLID. That's kinda
1) As you said, depositors
Good luck trying to do that
"Climbing a mountain that's only getting steeper"
-Barboon
I haven't read the article,
Edmundo Braverman wrote: When
fhurricane wrote: I don't see
I'd like to read your plan,
Assuming that it would work,
what makes people honestly
Smokey, this is not 'Nam, this is bowling. There are rules.
roar19 wrote: what makes
roar19 wrote: what makes
- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
Edmundo Braverman
I'll admit I'm not enough of
To echo what many of the
See my WSO Blog
silly, immature plan. If you
Coming from a Canadian we