“At That Moment, Operation Happy Looked Pretty Grim”

At the end of their latest radio piece on the financial crisis, Alex Blumberg and Adam Davidson make a great point about uncertainty in the nationalization debate:

Of course, if [Tim Geithner and the Obama administration] were planning to take over the banking system, they wouldn’t announce it beforehand. They’d probably say exactly what they’re saying right now, wait ’til everything’s set up, ’til they hired enough people and got all their plans in order … and then one Friday evening, they’d make an announcement, and nationalize the banks over the weekend.

It’s a good point because that’s what already happens, every Friday night, when the F.D.I.C. seizes a small bank — by surprise — somewhere in America, cleans it up, and sells it back to a private owner.

60 Minutes reporter Scott Pelley recently rode shotgun with a band of F.D.I.C. agents as they snuck into town under assumed names and then, after business ended for the week, simultaneously seized all five branches of Chicago’s Heritage Community Bank.

The F.D.I.C. takes pains to keep its takeovers secret until the last minute. In this case, they gave the Heritage takeover a code name: Operation Happy.

You can watch the report below. It’s fascinating viewing, and should make you feel better about the safety of your bank deposits.

(HT: Ben Chandler)

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  1. royale says:

    This secrecy seems like the best way to do it. No prior notice means that stock market investors don’t have the chance to take advantage by decimating the bank before hand.

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  2. Steven Surowiec says:

    I personally don’t see the big problem with nationalizing the banking industry. Many of the Founding Fathers wanted the country to have a National Bank (as apposed to a Central Bank). This is especially important in a country like the US where the Constitution calls for Congress to have control of the banks and the economy. If they don’t do what we like we can vote’em out. And while that doesn’t happen very often right now in Congress I’m willing to bet it would start to happen very often if they were actually given the ability to do what they were meant to.

    This is especially important when you consider that banks have the power to create money. if you give that power to a private organization it doesn’t matter what laws you have in places or who’s in charge, they can and will walk right over them because they’ll have dictatorial control over the entire country.

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  3. neil wilson says:

    I used to work for the FDIC and went to ‘paying agent’ school in DC. I left to work for KPMG before I ever had to go to a failed bank.

    I know that there is ZERO chance of anyone who was in a position to know saying what they were going to do on the record.

    Don’t forget, that as a business, the FDIC wants to keep its loses as small as possible.

    Saying that Citi is going to be taken over tonight would not be good for business.

    Citi might be taken over tonight but we won’t know until the close of business Friday.

    Are any other big banks as sick as Citi? I can’t think of any. NatCity is gone. Wachovia is gone. I’m not sure who else is as bad but I don’t follow banks full time anymore.

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  4. Mike B says:

    FDIC!! Everybody get down on the floor and put the deposit accounts in the bag….NO TALKING! :-D

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  5. Michael says:

    That seems like a tough job because dealing with bank customers is tough enough as it is. Prime example is that old guy who walked in with a briefcase. His deposits were insured. He should have known that. EVERYONE should know that. Yet there he was storming into the bank in a panic, flustered and initially unwilling to speak with anyone. I know he was old and can understand his fear of losing his savings, but panicky people do not impress me. Luckily that FDIC employee working the door was insistent enough to keep after him and be the voice of reason.

    I wish people could deal with money and their personal finances in a more rational manner, no matter what the economy is doing.

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  6. Dr. Tonic says:

    “Can the FDIC run out of money?”

    “Well, no, we are the government, we’ll print it if we have to”

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  7. David Chowes, New York City says:

    GOING OUT ON A TANGENT:

    Saw 60 MINUTES last weekend, as I always see every Sunday. Excellent, revealing and comforting piece on the FDIC.

    My comment: 60 MINUTES, now about 40 years on CBS amazes me. The number one program (in the ratings for many years), for a while the number of viewers declined.
    Now it’s the top or, one of the top CBS programs in terms of viewership.

    My question: how can a program of such quality draw so many viewers for so many years?

    It is the antithesis of THE BATCHELOR and DANCING WITH THE STARS and . . .

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  8. econobiker says:

    #5 Michael- you said “I wish people could deal with money and their personal finances in a more rational manner, no matter what the economy is doing.”

    Same feelings here.

    I have an acquaintance who, despite being college educated and even with a masters degree, kept all of his money in a savings and checking account. I mean everything- about $30k! in checking and $65k in a savings account. Not even in CDs but in a passbook savings at a lame interest rate. All of this wouldn’t have mattered too much, other than his loss of potential interest, until his wife cleaned out his accounts and their house one spring Thursday afternoon and turned herself into his ex-wife.

    Only then did I learn his naivete about money when I asked about whether he had Certificates of Deposit that she wouldn’t have been able to take and he asked “What are those?” It was sad.

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