Prometheus 6

As Larger Banks Crumble, Local Firms See Rush
By Brigid Schulte
Washington Post Staff Writer
Sunday, October 12, 2008; A01

Joann Gaskins panicked. After absorbing a steady drumbeat of bad news about bank runs, bank collapses and bankruptcies, she arrived at a Manassas branch of faltering Wachovia Bank minutes before it opened Sept. 17, demanded her savings in cash and walked out the door. For eight days, she toted a metal box stuffed with $19,000 in a five-inch stack of $100 and $50 bills back and forth from work to home, while she tried to figure out what to do with it.

She picked Burke & Herbert, a family-owned Alexandria bank that takes pride not only in how boring its name sounds, but that the boring, conservative way it does business has kept it chugging steadily along since long before the Civil War. A few days later, Gaskins switched $23,000 -- in a cashier's check this time -- from her trucking business account to Burke & Herbert. Now she's just waiting for $200,000 in CDs to mature before she moves the rest.

"I feel a whole lot safer," Gaskins said. Plus, she gets to meet the bank president this week.

She knows, on some level, that her money would have been safe at Wachovia. FDIC insurance covers deposits up to $100,000, and Congress raised the limit to $250,000 because of the crisis. But her instinct was to flee. To seek comfort.

If anything, what the market meltdown has shown in sharp relief is that the global financial system runs as much on trust as on anything else. And now that that trust is shaken, the anxious and the nervous are draining bank and money market accounts by the millions from what they perceive to be unstable institutions and turning to something that feels more familiar.

Although exact numbers tracking the flow of this panic won't be available for a few more weeks, Chris Cole, spokesman and regulatory counsel for the Independent Community Bankers of America, said many of the 7,000 community banks in the country are reporting an influx of deposits. Indeed, Burke & Herbert, with $1.6 billion in assets, has seen a staggering $45 million in new deposits in the past two weeks. The draw of community banks, Cole said, is the relationship. "At times like this, people may feel it's time to shift to a bank that's nearby, where their neighbor may bank, where they may know the loan officer," he said, "a place that they know is safe."