Banking Panic

The chain of bankruptcies this year has caused some banking panic and might cause a long economic recession. Many of the recessions in the United States were caused by banking panics.  In August 2007, Countrywide Financial suffered a bank run as a consequence of the subprime mortgage crisis.  In January 2008, Bank of America announced that it planned to purchase Countrywide Financial for $4.1 billion in stock.  In September 2007, the British bank Northern Rock arranged an emergency loan facility from the Bank of England, which it claimed was the result of short-term liquidity problems.  In March 2008, a bank run began on the securities and banking firm Bear Stearns.  In July 2008, U.S. mortgage lender IndyMac Bank was seized by federal regulators.  In September 2008, the Office of Thrift Supervision was forced to shut down Washington Mutual, the largest savings and loan in the United States and the sixth-largest overall financial institution, due to a massive run.  Citigroup's move to buy Wachovia's banking operations was widely seen as an effort to shore up its deposit base, which will now look less solid.  In September, Wachovia had suffered a silent run. The exact amount of the run withdrawn is still unknown.  In September 2008, a deal was announced for Citigroup to buy Wachovia banking operations for $2.1 billion.  Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.  Wachovia said in October 2008, that it had agreed to be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal this deal trumped Citigroup's plan to acquire Wachovia's banking operations.  The deal wouldn’t require government assistance, like the Citigroup deal had.  The question now is who is next?  I think that Citigroup is going down within a year. 

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