AP - Bank runs here unlikely thanks to FDIC

Bank runs here unlikely thanks to FDIC

Sept. 23, 2007 (AP) - For many Americans born after the Depression, bank runs are just scenes out of movies like "It's a Wonderful Life."

The troubles at British lender Northern Rock PLC show they can still happen, but it's much less likely that Americans will be seen queuing up outside banks anytime soon to collect their cash as British depositors have this week. The U.S. banking system has different rules and procedures than its U.K. counterpart to guarantee the nation's $4.2 trillion in insured deposits are backed by the government.

Americans can get spooked like anyone else - when the U.S. lender Countrywide Financial Corp. acknowledged sharp losses in its mortgage business, customers packed its bank branches and jammed its online operations, trying to get answers and cash out.

The United States has seen nothing in decades like the billions of dollars Britons have withdrawn from banks in recent days, however.

The reason is largely that the Federal Deposit Insurance Corp. guarantees up to $100,000 per account per bank, and $250,000 for retirement accounts. In Britain, the government guarantees all deposits below 2,000 pounds ($4,000), 90 percent of deposits up to 35,000 pounds ($70,000), and nothing above that.

Furthermore, in the United States, even deposits beyond the $100,000 limit are probably safe, given the Federal Reserve has procedures to keep banks solvent.

The chance of a run on a U.S. bank is "almost nil," according to Richard Bove, a bank analyst at Punk Ziegel & Co. He added that Fed Chairman Ben Bernanke has repeated that he's willing to rescue the banking system.

U.S. bank runs are possible, as the brief panic over Countrywide suggested. But even if one happens, U.S. depositors shouldn't fret too much about losing their shirts.