Runs are very unlikely because deposits are guaranteed, but there will certainly be additional failures. But the consequences will not be the same as in the early thirties because the banks will be taken over by the FDIC in an orderly way, as happened in 1982-1992. It will cost the taxpayers a lot of money, but the economy may not be severely damaged - we didn't exactly go into a depression in the nineties.

Well, I'm glad we have you around here, skeptonomist, to clear things because, you know, if YOU don't think it will happen then surely Mr. Roubini, who apparently does think a run on banks in the U.S. IS a possibility, is mistaken.

This situation is nowhere near comparable to the S&L failures of the 80's but then again, we have you, skeptonomist, to reassure us that it is. Good thing there are armchair economists like you around.

Sounds nice of the govt, but what will _they_ do when the market for US bonds dries up? If they don't take measures to ensure a level of ownership of a "real" asset (like any reasonable business owner), then I think this policy will run dry. The last number I read said that there are 6 trillion worth of assets out there and 60 trillion worth of obligations (no real assets--just paper). The US is already 4 trillion in debt (roughly 2 trillion from the war in Iraq). The 0.7 trillion bailout passed by congress is trying to tackle the 60 trillion problem without owning any of the 6 trillion in real assets. I suggest everyone listen to "Another Frightening Show About the Economy" on (http://www.thisamericanlife.org/). You want to see a bank run? The current Bush/Pelosi/Reid strategy will lead us to the mother of all bank runs. I'll bet Saddam's laughing in his grave.

Global Fears of a Recession

By MARK LANDLER
Published: October 6, 2008
WASHINGTON — When the White House brought out its $700 billion rescue plan two weeks ago, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Three days after the plan was approved, it looks like a pebble tossed into a churning sea.

The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home, where it pummeled stock and credit markets on Monday.

While the Bush administration’s bailout package offers help to foreign banks, it seems to have done little to reassure investors, particularly in Europe, where banks are failing and countries are racing to stave off panicky withdrawals after first playing down the depth of the crisis.

Far from being the cure for the world’s ills, economists said, the rescue plan might end up being a stopgap for the United States alone. With Europe showing few signs of developing a coordinated response to the crisis, there is very little on the horizon to calm rattled investors.
www.nytimes.com/2008/10/07/business/worldbusiness/07global.html?_r=2&ref=todayspaper&oref=slogin&oref=slogin

That's right, boys & girls. The Administration's Bailout is taxing you and me to bailout FOREIGN Banks!

Not only is the Administration giving a huge shafting here, but EVERY member of Congress who voted for it after being inundated with constituent messages telling them not to, is due equal blame for it.

That group INCLUDES Senators John McCain AND Barack Obama!
BOTH!

With the above article telling us that the Fed (a group of private bankers empowered by the gov't) is going to dump millions and billions of new dollars into banks to let them pay off their depositors does one very serious thing that doesn't seem to be part of the discussion here, or nearly anywhere else.
It inflates the dollar, so that what a depositor will be getting back from the bank is worth less than what he invested there, even after he collects any interest due.

This is what we get for letting the Federal Gov't create a Fractional Reserve Banking system (read up on it. it's a scam that sucks up the value of your money to begin with.), create the Federal Reserve who can inflate our currency at will, and for taking our currency from being gold-backed so it would retain real-world value, and replace it with a piece of paper and a promise from the government.

This "save the banks" scheme won't work. It's already not working.

So what will the government do when their plan to tax us for hundreds of $billions$ to support banks & Wall Street investors doesn't work?
Why..., they'll do what they always do when their approach fails. They'll do the same thing only more so, and tell us this will "fix" the problem.