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7/15/08

The Associated Press: US Economy - Analysis: Leaders running out of economic options - run on the banks by depositors? - By Tom Raum

For the complete report from the AP click on this link

Analysis US Economy: Leaders running out of economic options - run on the banks by depositors? - By Tom Raum

The nation's leaders are running out of answers to America's economic crisis. The Federal Reserve has no more practical room to push interest rates lower; there's only so much taxpayer money for shoring up housing, and if depositors lose confidence there's little officials can do to stop a run on banks. With soaring budget deficits, swollen from the costs of wars in Iraq and Afghanistan and increased spending on homeland security, there's only so much taxpayer money for bailing out failing financial institutions."I fear that we're sitting on a financial powder keg," Bernanke was told by Sen. Richard C. Shelby of Alabama, senior Republican on the Banking Committee.

And the risk of runs on banks is still present, although minimized by federal deposit insurance on accounts up to $100,000 and by other federal safeguards. But nearly $1 billion of IndyMac's approximately $19 billion in deposits was uninsured, according to the Federal Deposit Insurance Corp.

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