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I suspect that many of you who read my earlier article An Old Style Run on the Bank is Likely decided there was no way in today's modern world that a bank run could happen and take down our banks. After all many more safeguards have been put in place since the Great Depression. A few of you may have decided to pull some of your money out to be safe, but likely the majority of you all have done nothing. It is also easy to be complacent because of FDIC insurance.

Well, that's understandable. Its easy to think such a major thing can't happen or that it won't happen to you. After all most of us where not alive during the Great Depression so the realities of what is possible seems like a distant textbook story to most of us. My grandmother was of course around during the Great Depression, and I still enjoy her stories of thrift. Its amazing how creative people could be to save money and make items last.

Even if FDIC insurance can keep your accounts safe without printing more money, there would still be an inconvenience to you if your bank closed. With many of us living from paycheck to paycheck, could you imagine not having access to your money while the FDIC goes through its process of shutting down the bank and moving the assets and records to another bank?

Not all banks would collapse if there was a mild run on the banks, but the weak ones would be the first to go. I was first shook up when I heard that Netbank was shutdown by the FDIC a while back. The reason that got my attention so much is because I used to be a customer of theirs. There was a time I did all of my banking there including checking and automatic bill pay. That made me realize, that yes... it can happen to me or you.

It has been reported by several mainstream media outlets that the FDIC is trying to recruit retires that are familiar with closing down failed banks. In fact, Jaret Seiberg, with the Stanford Group reports that "Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia."

Many may think I was an alarmist by stating that a run on the banks is likely. But, obviously, the FDIC is worried. If over a 100 banks in the US start closing, don't you think people just might get worried and start to pull out their money? It seems like a likely scenario to me.

Either way, whether you want to pull out your money or not... at least check the safety ratings of your bank. I was surprised when today I checked and one of the major online high yield money market accounts that I just transferred my money from, has a terrible rating. The bank will remain nameless, since the last thing I need is a lawsuit from them. The bank is rated at two out of five stars and that was back in Sept, 30 2007. I bet things have gotten worse in the last six months. In the Memorandum, it goes on to state that "We have come to believe that, as of September 30, 2007, this institution exhibited a below average condition, characterized by approximately normal overall, sustainable profitability, questionable asset quality, below standard capitalization, and near normal liquidity." It goes on to say that "The institution reveals, as previously stated, questionable asset quality. That conclusion incorporates our analysis of data depicting regional real estate loan quality, as well as our computations of a higher than standard September 30, 2007 nonperforming asset ratio; below normal holdings of one-to-four family mortgage loans; and greater than average combined investments in commercial real estate and construction loans, two categories that have, in the past, produced credit quality deterioration within the thrift industry."

Now, those words do not give me warm fuzzy feelings. I think its ironic that I daily see their ads on the web. They are wonderfully written and flashy ads. The average person would have no idea that bank is in such bad shape.

So, if you do plan to keep your money in the bank. At least check the safety ratings of your banks. Make sure that you only keep your money in highly rated banks. Luckily, my local credit union has a great rating. I plan to still keep some money in cash and gold in my safe, but the rest I feel fairly comfortable with being in my credit union for now. Plus, since the money is now local and not in an online Money Market account, I can drive there in 5 minutes and pull out the rest of the money if things start to deteriorate quickly.

To check the safety rating of you bank or credit union please visit the following link to the Bankrate Safe and Sound page.

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Please note that the memorandum quotes above where provided by Bankrate.com