Sad, but funny (BJ Lawson)

BJ Lawson infuses a little reality into a report on the IndyMac seizure and bank run:

Headline of the day:

Cops to IndyMac customers: Remain calm or face arrest

Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest Tuesday as they tried to pull their money on the second day of the failed institution’s federal takeover.

At least three police squad cars showed up early Tuesday as tensions rose outside the San Fernando Valley branch of Pasadena-based IndyMac.

Federal regulators seized Pasadena-based IndyMac on Friday and reopened the bank Monday under the control of the Federal Deposit Insurance Corporation. Deposits to $100,000 are fully insured by the FDIC.

Let’s try infusing this story with a healthy dose of reality:

Cops to IndyMac customers: Blame the bank, not us

Police ordered angry customers lined up outside an IndyMac Bank branch to study the history of fractional reserve banking lest they repeat the unpleasant experience of losing their retirement savings.

Customers were informed that the bank had caused those deposits to vanish into thin air by lending in excess of their deposits. Customers were further informed that while the bank regrets their loss, the money destroyed was simply debt-based money that the banking system created out of thin air in the first place to be loaned with interest. In other words, “Easy come, easy go.”

Finally, it was noted that bank insolvency is not a theoretical risk, but simply standard operating procedure as all banks operate in a state of regulated insolvency.

Federal regulators seized Pasadena-based IndyMac on Friday and reopened the bank Monday under the control of the Federal Deposit Insurance Corporation. Deposits to $100,000 are fully insured by the FDIC based upon the government’s ability to print more money if the FDIC’s paltry reserves become exhausted.