Bank Run, USA

LOS ANGELES -

Like dozens of others waiting in line with her, Joan Rubin said she was drawn to IndyMac Bank by the high interest rates it paid and the friendly service her local branch provided.

All that was a memory on Tuesday, however, as Rubin and about 200 other anxious, embittered and sometimes angry customers swarmed an IndyMac bank branch in the San Fernando Valley, creating a Depression Era-like scene as they demanded their money just four days after the failing bank was seized by federal regulators.

"I've already lost three nights of sleep and three days of eating; now I'm done," Rubin, 52, said as she sat in a beach chair on the sidewalk in stifling heat. She planned to empty her account following the failure of the Pasadena-based bank, which has 33 branches, all in Southern California.

"It's a very sad day in America," Rubin said.

At one point police had to be called to the branch in the city's normally quiet Encino neighborhood. Tempers grew short when customers who had arrived before dawn accused others of cutting in line.

Some of the line jumpers had been turned away the day before but were given vouchers granting priority by bank employees.

Police quickly restored order without arrests, and as the day progressed people were divided into two lines that each stretched for an entire block. People wanting to close accounts were let in, in groups of five.

Customer Ann Collier, 67, a retired secretary, also chose IndyMac as her bank because of its high interest rates.

Initially, she was careful to deposit less than $100,000 in her account so it would be fully insured by the Federal Deposit Insurance Corp. But over time, her money grew beyond the limit.

She declined to say how much she now might lose.

"I have to live off this money for a long time," she said while waiting in line late Monday outside the Pasadena office.

Lillian Krasn said she had a strange feeling something was wrong when she arrived at the Encino branch a week ago to renew her certificate of deposit, but she went ahead anyway. She came back Tuesday to cash it in and take the money elsewhere - although exactly where, she hadn't decided.

"Where do you go from here?" the 78-year-old retiree asked. "Under your mattress?"

Shortly before noon, two employees of rival Comerica (nyse: CMA - news - people ) bank arrived to hand out water bottles with their business cards taped to them. They said they hoped to scoop up some former IndyMac customers like Krasn.

"One man's loss is another man's treasure - or something like that," said Comerica banker Danny Sobrino.

Meanwhile, as the wait stretched into hours, people donned baseball caps or carried umbrellas to shield themselves from the sun. Some fanned themselves with their bank documents as they sweated in temperatures that were already in the 80s by midmorning.

The Office of Thrift Supervision transferred control of the bank to the FDIC on Friday because it didn't think IndyMac could meet depositor demand. Over the weekend, it became IndyMac Federal Bank, FSB, and by Monday morning the scramble by bank customers to recover their money was on.

Shortly before noon Tuesday, the bank provided folding chairs for those who hadn't brought their own, and the line decreased to about 100 as some people were persuaded to schedule appointments and return later.

A few people, such as Aliki Deffam, visited the bank to make deposits. For them, there was no waiting to get inside.

Deffam, a real estate agent, said she believed the FDIC, which is now operating the bank, when it announced that all IndyMac deposits were fully insured up to $100,000.

"I feel very safe," said Deffam, 42. "I don't think that my money is going to disappear."

Many others, however, weren't willing to take that chance - or to leave until they had their money in hand.

"I just can't take their word for it," said Ismelda Quintos, an accountant. "I want to get my money out so I can sleep at night. It's hard-earned money, and I'm not rich, so it's a big deal for me."

11 reasons Bernanke's recession lasts till 2011 - PAUL B. FARRELL

11 reasons Bernanke's recession lasts till 2011

Timing the next bull: Kick-start it in 2008? Or is it a long secular bear?

By Paul B. Farrell, MarketWatch

Last update: 7:32 p.m. EST Feb. 25, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- Remember that hot 1973 Stealer's Wheel song marking the end of the Nixon era? "'Cause I don't think that I can take anymore. Clowns to the left of me, jokers to the right, here I am stuck in the middle with you!"

It's still a perfect metaphor. Testifying before Congress: Fed Chairman Ben Bernanke on the left. Treasury Secretary Henry Paulson on the right. The American public stuck in the middle.

Last summer they assured us the subprime-credit crisis was "contained." We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: "America will avoid a recession." New data tells a different story.

Clowns to the left ... jokers right ... stuck in the middle ... can't take it anymore.

But we have to, we have to hang on at least 10 months more, praying they won't do too much more damage. But I'm afraid they will: more lies, blunders and incompetence will drag out this bear. Like the song says: "Got a feeling something ain't right."

Read the new InvestmentNews, a professional journal for financial advisers. The lead headline grabs you: "Bad times for stocks could last many years." A long secular bear.

Do you believe it? That's the big question today: When's the next bull? How long will the bear last? And forget Washington's rhetoric about "no recession." The truth is, you can call it a "bear," "slow growth," a "downturn," a "recession" -- call it whatever you want. Timing's the real question. How long will it last? When will it bottom? 2008? 2011?

Test your timing skill. You tell us, what'll drag this out 30 months, like in 2000-2002? Or shorten it? Here are 11 critical factors for your timing equation, things that could make this bear-recession shorter or longer. You tell us. Add a comment. What's your prediction: How long before the next bull?

1. Stagflation: Bernanke's no-win Achilles heel

Reading Fed-watcher William Fleckenstein's new book, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve," you get the feeling that for 18 years America's banking system was run like a "new age" hippy commune, by a Ayn Rand free spirit who believed "anything goes."

Now the Fed's run by a college professor and Fleckenstein says he's "in over his head." Except this is the real world, a $13 trillion economy in a $48 trillion world, not a college seminar on economic theory.

In the 1970s Nixon faced a similar problem, convinced then by Fed Chairman Arthur Burns: "No one ever lost an election on account of inflation." Wrong! Low rates generated inflation not growth. That stagflation triggered a bear/recession. Is Professor Ben trapped, repeating history?

2. Housing-credit meltdown: We've got a long way to go!

It's far from over folks and still spreading: Years of inventory, foreclosures, building slowdown, risky bond insurers, weak rating agencies, funds holding bad debt, freezing exits and fuzzy math on values. Yet Bernanke and Paulson still live in a Washington bubble of wishful-thinking fantasies.

Economic realists say what's needed is a massive $1.6 trillion demand-driven program (that's the record cash Corporate America's hoarding) not a dinky $160 billion supply-side "appease the voters" giveaway that ends up increasing the odds of a lengthy Nixon/Burns style bear-recession.

3. Commodities: World's new reserve 'currency,' not dollars

Forget paper money and IOUs. Commodities are the world's new "currency:" Hard stuff like oil, grains, metals, gold. And that means America is financing the growth of our enemies, surrendering our long-term economic power for short-term oil-guzzlers and plastic toys. We are responsible for making Russia and China into threatening world powers. Buffett warned us. We're selling the farm, piece by piece.

4. Toxic derivatives: World's $516 trillion ticking time bomb

Derivatives are great for deal-by-deal risk management in a $48 trillion GDP world. But leverage them 10 times over across the globe and we got a financial "weapon of mass economic destruction."

Bill Gross warns that the world's new unregulated "shadow banking system" is printing new money, now at $516 trillion, out of thin air, with no "central banks of last resort" backing up the "Frankenstein" monsters they've created.

5. Massive debt: Everywhere, trade, federal, states, local

America's Comptroller General David Walker, Congress's head accountant who is leaving his position next month, warns our government is "bankrupting America." Using unethical accounting worse than Enron's. Fiscal responsibility lost. He sees "striking similarities" with Rome. Both parties are gluttons in a spending orgy.

We spend-spend, load debt on future generations, then use accounting gimmicks to hide our greedy excesses: Hidden earmarks. Supplemental war appropriations. Meaningless IOUs after stealing from Social Security.

6. America's new 'pushers:' Banks feeding consumer addicts

Trader's Daily captured it perfectly: "Never underestimate the power of the superpsycho, hyper-spending American consumer. Where there is no cash, they will sell their soul. Or just charge it. Let's just not think about what it all means for credit-card debt down the road."

Meanwhile, the credit meltdown is making banks desperate for money. A recent Chase credit-card commercial fuels consumer addictions: Wife wants bigger television. Husband smiles. They shop to the pounding drumbeat of Queen's hit 80s song: "I want it all, I want it all, I want it all ... and I want it now!" Tag line: "Chase what matters!" Yes, Chase debt, all you addicts. Forget saving, spend like there's no tomorrow.

7. More wars: Pentagon predicts bigger, costlier conflicts

The Pentagon's internal studies see a perfect storm accelerating wars worldwide: Global population growth, limited natural resources and global warming. Our war machine is exploding. The Pentagon gets over 50% in the new federal budget. We're only 21% of the world's GDP, yet spend 47% of the world's total military expenditures.

Our power-hungry mindset is becoming self-destructive, suicidal. Remember Nixon strategist Kevin Phillips' warning: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."

8. Greed: Wall Street and Corporate America's defining 'value'

Values start at the top. But the top won't change for 10 months. Leadership, statesmanship and character are vanishing. Five short years ago Corporate America and the mutual fund industry were consumed by greed. How quickly we forget.

It's worse today. We see greed consuming not just Wall Street's clueless CEOs, but the entire industry: Outrageous bonuses of $38 billion amid mega-billion write-offs. Fire sales of billions more American equity to sovereign nations.

From the top down, greed is driving America from bubble to bubble. Wall Street's already fueling the next bubble, trading on a volatile market.

9. Democracy failing: America now run by 35,000 lobbyists!

Forget government "of the people, by the people, and for the people." Adam Smith's "invisible hand" is now a small group of 35,000 highly paid, greedy lobbyists demanding handouts. They run America from the shadows, for those at the top of the economic food chain and vastly outnumber Washington's 537 elected officials.

Nationally there's an estimated quarter million lobbyists, with hundreds of millions of dollars to buy favors in campaign contributions. Politicians talk "change," but America's lobbyists will still be working for their special interest clients in 2009. And they'll fight all "changes."

10. America's already in a recession, and in denial

This year's elections will be a huge factor in lengthening the recession. Our lame-duck government will delay action on critical issues. It reminds me of my days counseling addicts and alcoholics. Change never happens until they admit they have a problem. Same here.

Paulson and Bernanke cannot admit there's a recession. They'd have to take blame for America's failed policies. And congressional Democrats are weak co-conspirators in this meltdown. Nobody has the guts to take responsibility. They're all like addicts and alcoholics, in denial, giving lip-service to "change," while they blame the other guys and support ineffectual stimulus plans.

Vote for whomever, but this lame-duck mindset plus lingering partisan rancor will push any recovery at least into 2009, probably delay the next bull till 2010 or 2011.

11. Class warfare: Superrich vs. Main Street America

No matter who wins, the presidential campaign is warning us: A major battle's coming between "the rich and the rest;" over taxes, benefits, cuts, power.

For years the media collaborated with Wall Street and Corporate America, hyping "Ownership, the New American Dream," where everyone benefits, shares the wealth, gains a piece-of-the-action, ownership in "The Dream" through the magic of housing, stocks, growth, profits, retirement plans. But the housing-credit contagion killed the dream.

Yes, the superrich did get richer. But "the rest" didn't. And they're waking up to a widening gap. A backlash is brewing and will explode ... delaying a recovery and a new bull.

Clowns to the left, jokers right, we're stuck in the middle. Can't take it anymore? Add a timing comment. Tell us: When's the recovery? Next bull? Late 2008? Not till 2011?