Citigroup Says Feds Ordered 7 Day Restriction On Bank Withdrawals !

What happened to the about US$27 Trillion bailout, guarantees... ? Why are they not lent out? Chart by businessinsider.com .

• This is a warning sign that all is not well. I am really uncomfortable reading this, as it implies the potential of bank runs! Why would they institute such a ruling if the banking system is healthy? Citigroup still has immense exposure to derivatives, which are now worthless. The reason why many banks are classified as solvent is because of the FASB ruling allowing banks to ‘Mark to Model’ for their assets, around March 2009. But for that, all the Top 5-7 banks are bust! Despite the government’s bailouts and guarantees amounting to about US$27T, the banks are still iffy! This tells you that the problem is not going away soon and the quadrillion $ derivatives is intractable! Paul Joseph Watson reports:
   
  Announcement stokes fears of old fashioned bank runs if economy takes a turn for the worse.
  A new advisory being sent by America’s third largest bank to its account holders has stoked fears that major financial institutions could be preparing for old fashioned bank runs if the economy takes a turn for the worse.
   
  Originally reported by John Carney over at the Business Insider website, Citigroup is sending the following information to customers along with their bank statements. “Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change.”
   
  An almost identical advisory to the one being sent out can be read on page 22 of Citbank’s Client Manual effective January 1, 2010, which can be read here from Citibank’s own website. “We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past,” states the manual.
   
  According to the Future of Capitalism blog, Citigroup originally claimed that the warning was only sent nationwide as a result of a mistake, but that the measures do apply to account holders in Texas.
   
  However, in a statement, Citigroup confirmed that they had reserved the right to impose the new 7 day rule on all account holders nationwide, but claimed they had no plans to enforce it. The bank stated that they had been forced to enact the new policy as a result of federal regulations.
   
  “When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future,” reads a statement released by the bank.
   
  Over the last 18 months, numerous rumors of bank runs, “bank holidays,”  and limitations on access to cash at ATM’s have been floating around. Citigroup’s new policy to restrict withdrawals won’t do anything to calm such fears. As we reported back in 2008, the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000, only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.
   
  This revelation prompted fears that an accelerating amount of bank closures could absorb FDIC funds and leave holders of money market and traditional savings accounts exposed.
   
• See also:
   
  Citigroup Warns Customers It May Refuse To Allow Withdrawals
  Citigroup Can Limit Demand Deposit Withdrawals; Money Funds Can Too

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