Sunday, October 4, 2009

Bank Closing Rumors

There are rumors on the internet about week long bank closings. One rumor has Wells Fargo bank closing for a week, beginning October 25, supposedly to merge their computers with those of their acquisition Wachovia.

A second rumor has Bank of America warning its top clients to expect a one week shutdown of banks. But this appears to be a re-circulation of an October 2, 2008 rumor.

I am extremely skeptical of both rumors. However, given the current economic environment, the public can easily be spooked.

The Bank of America rumor originally came out of Henry Blodgett's internet conglomerate, Business Insider, specifically Clusterstock, last October. Here's the original 2008 post by John Carney at Clusterstock:

A rumor has begun to circulate that Bank of America has sent a memo to top tier clients warning them to anticipate a one-week shutdown of banks. Bank holidays were used following the crash of 1929 to prevent runs on banks during especially panicky time but, as far as we know, no public official has advocated this tactic in our current situation. In fact, we strongly suspect that this rumor is just nonsense.

Keep in mind that while we trust our source on this, he had not received the memo himself. Instead, he had been informed about the memo by a friend who claimed to have received it. We’re rating this: highly speculative and probably false. Even if Bank of America had sent the memo, we’re not sure how they would know in advance to expect a bank holiday.

One possibility might be that Bank of America has merely outlined some worst case scenarios for clients, and included a one week bank holiday among them.

Bank of America called the story "completely unfounded."

The Wells Fargo rumor appears to have started this week at an internet discussion forum. It appears to have the writing style, including poor grammar, found in internet email scams. I suspect that it may be nothing more than just that, a prop piece for some email scammer.

To repeat, I am extremely skeptical about these rumors. That said, you should always have your money spread out over the financial system, some in banks, some in mutual funds, some under the bed, and plenty in gold coins.

I will contact both banks in the morning and some bank regulator sources that I have, but I really don't expect any panic news, and fully expect the rumors to be completely shot down.

(Thanks to Lori Smith who originally brought the rumors to my attention.)

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