Run on a Bank, does anybody remember 1933

This sign was up late one night last week so I took a picture early one morning when I was out running with the dog.

The news about Bear Stearns being bailed out by JP Morgan and the Federal Reserve is stunning. One of the nation's largest banks has effectively no assets at this time.

Some of this situation is reminiscent of runs on the banks that happened from 1929-1933. People are panicky and fear is rampant. The difference is that in the depression both the Federal Reserve and the Hoover Administration stood on the sidelines. The current Fed seems ready to engage; but monetary policy isn't enough. It's time to see what really going on in our nations financial services sector.

It's time for a bank holiday or rather, because of the complex nature of our deregulated financial services industry its time for a bank, credit-card, mortgage brokerage, mortgage backed securities, and investment bank holiday.

Most conventional banks wouldn't need to shut down at all. They were shut down and only allowed to open by FDR in 1933 after thorough audits. The regulations started in March 1933 led to the current FDIC set up in which we, as tax payers, insure our own banks against fiduciary negligence.

The hard part today is that many other less conventional but very key parts of the economy need to be audited and in some way insured. Bear Stearns, as a commercial bank, has no FDIC protection. In March 1933 the Congress acted in concert with the President. Can that happen in 2008 or will we have to wait until 2009.