Banks Overstock ATMs In Case Panicked Customers Make Mass Withdrawals

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Whether the US government shutdown is a catastrophe or that the media is playing it up, US banks are getting ready for the possibility that people will panic. According to the Financial Times, “two of the country’s 10 biggest banks said they were putting into place a ‘playbook’ used in August 2011 when the government last came close to breaching the debt ceiling.One senior executive said his bank was delivering 20 – 30 percent more cash than usual in case panicked customers tried to withdraw funds en masse. Banks are also holding daily emergency meetings to discuss other steps, including possible free overdrafts for customers reliant on social security payments from the government,” (h/t Zero Hedge).

Banks Overstock ATMs In Case Panicked Customers Make Mass Withdrawals

Banks overstocking ATMs

Of course there’s no reason for the government shutdown to threaten the banks in this way, but bank runs are dangerous whether the cause is rational or not. From the banks perspective, keeping a larger amount of cash in ATMs for the next couple of weeks shouldn’t have any material effect on operations, but the prospect of a couple incidentally empty ATMs creating a panic through Twitter isn’t that far-fetched.

Warren Buffett said it just this week on CNBC’s Squawk Box (in an entirely different context), “The whole banking system rests on confidence and most of the time it’s there… and if people think the banking system is unsound, it is unsound because no banks can pay out all their liabilities at one time. So it’s essential that people believe in the soundness of the banking system.”

Of course, we’re not talking about anything nearly as important as Buffett was (the role of TARP), but the principal remains. It’s important for people to have trust in the banks if they are going to function properly, and when the banks can act to preserve the public trust, especially at minimal cost, they probably should. Anxiety over the shutdown will increase as it goes along, and will go into overdrive on the 17th, and even though there’s no reason for this to directly affect people’s personal checking accounts, it’s nice to know that some banks are taking a few precautions.

About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.