I always thought that bank runs were things that you read about in distant lands or in history books.  They just aren't supposed to happen in 2007 in the US, and they certainly aren't supposed to happen to people who are educated and prudent about their money (which I believe that I am).  Therefore, I am still trying to figure out how I became part of one last week.

It all started many years ago, I believe.  I had an account with Brown & Company, one of the first online brokerages, and their service was spectacular.  When Brown & Company was purchased by JP Morgan, I grew more and more comfortable with it for all of my banking needs.  I gradually migrated my money over the Brown & Company to the point where I had my entire net worth (a couple of million dollars) invested there.  Since I trade regularly, the discount brokerage rates were excellent and I felt no reason to be concerned that my entire net worth was invested in street name through a company owned by one of the largest US banks.  I held all of my securities there in street name.

At some point, about a year and half ago if my recollection is correct, Brown & Company was purchased by ETrade.  While I was initially concerned about this acquisition and the increased risk and particularly ETrade's lack of significant insurance above SIPC limits, I believed based on my research that ETrade was a growing company and that my holdings would be secure. 

As ETrade's stock started to decline over the last several weeks, my concerns became hightened but I didn't have time to take any action.  Then, all of the sudden on Monday, I awoke to the realization that the company was trading down 60%, and that an analyst at Citibank had hit it with the bankruptcy word.

I know that the question of whether people who live in glass houses should throw stones has been addressed elsewhere on this site in relation to this downgrade and Merrill analyst on Countrywide and I don't want to get into it here.  I also don't want to get into what ETrade owns or doesn't own.  I believe that it is clear however that they took on much too much risk in relation to SIV and MBS securities at the banking level than could possibly have been appropriate.

I just didn't have time to analyze these things as I suddenly became aware that all of my stocks (and virtually all of my wealth) was held in street name in a bank that may imminently fail.

I just wanted out of everything over SIPC limits (basically over $500,000 with no more than $100,000 in cash).  I have very minor concerns about SIPC, a private fund to protect depositors in brokerage accounts.  My bigger concern was the fact that ETrade was estimated to have over $15 billion in deposits over this amount covered only by a $600 million excess insurance policy.

Contacting ETrade at first was not difficult, but became gradually more difficult over the course of the week as they tried to stop this bank run.  Their communication with depositors was very poor, and did little to lessen my concerns. While ETrade has always been an excellent customer service organization with excellent tools, suddenly they put up every roadblock possible to transferring by wire or by DTC transfer my assets out. 

After five days, I finally got most of my assets out. 

As I recover from this experience, I am very sour about the entire thing.   I hope ETrade survives and hope to be able to move large parts of my assets back to them when they have more realistic insurance cover.   While I understand that they dragged their feet in order to stop or slow a real live bank run, I am angry that my life was so disrupted for a week by this entire experience. 

Nothing is going to get me my lost week and lost sleep back; I just hope that other can learn from this experience, especially if we start to see more and more banks and brokerages approaching failure.