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Is it possible, as a worst case scenario, for the Feds to close the banks as FDR did in the 1930's?

Name: Dorothy Carey
City & State: Merced, Calif.

Question/Comment: I hope you will not think me too crazy for asking this question. Is it possible as a worst case scenario for the Feds to close the banks as FDR did in the 1930's? I am a 63 year old that's heard my mom and dad and my aunt talk about those days but they are no longer here for me to talk to. I am living on Social Security and a small annuity from my late ex-husband. What is the prognosis for me?

Paul Solman: The Fed IS closing the banks. It's just that this time, it's the INVESTMENT BANKS it's closing. In FDR's day, the banks performed both commercial AND investment functions. Because the banks had taken such wild risks, they were split up (the ones that weren't closed, that is). So the House of Morgan became JP Morgan (commercial bank) and Morgan Stanley; the First Boston Corporation (investment bank) was hived off from the First National Bank of Boston (commercial), etc.

Your social security is safe. The annuity? I've asked this question of many experts over the past few years and have never gotten a wholly reassuring answer. What IF the annuitizer fails? Not clear what would happen. States regulate insurance companies. They're usually pretty tough on them. But these are unusual times.

-- Posted September 19, 2008 | Comments (0) | Permalink