No Link Between Stock Crash, Run on Banks--FDIC

There is no evidence that last month’s record stock market dive resulted in a run on banks, a top federal regulator said Friday.

L. William Seidman, chairman of the Federal Deposit Insurance Corp., said his agency’s nationwide survey this week of 215 banks uncovered no serious problems because of the drop in stock prices in October.

There had been fears that the record 508-point plunge in the Dow Jones industrial average, which wiped out $500 billion in wealth Oct. 19, would threaten the banking system the way bank failures followed the 1929 market crash.

Seidman told the National Press Club that the survey of banks in 199 cities across the nation covered small rural financial institutions all the way up to several banks in the multibillion-dollar category of assets.

“There is no evidence of a run on our banks,” Seidman said. “If people are looking for a domino effect to take place in our economy following Black Monday, there just is little evidence in the banking system at this point that the dominoes have begun to fall.”

Seidman said the survey showed that only 1% of banks reported that deposit flows were noticeably lower since Oct. 19 while two-thirds reported deposit flows were about the same and one-third said deposits had actually increased since the stock market crash.

The survey found that 94% of all banks did not expect any effect on loan losses from the stock market crash.