This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/2/hi/programmes/world_news_america/7647556.stm

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Washington diary: Trust lost Washington diary: Trust lost
(about 2 hours later)
By Matt Frei BBC News, WashingtonBy Matt Frei BBC News, Washington
On the metro, in the queue for the Greek Deli at lunchtime, in the office and at home, the conversations can be overheard everywhere.Big banking names have been hit by the crisisOn the metro, in the queue for the Greek Deli at lunchtime, in the office and at home, the conversations can be overheard everywhere.Big banking names have been hit by the crisis
They are conducted in staccato bursts with an added octave of anguish:They are conducted in staccato bursts with an added octave of anguish:
"Which bank? What kind of account? How fast? Yesterday? Jesus! What about Swiss Franks? Gold? No, forget Gold! Too volatile!""Which bank? What kind of account? How fast? Yesterday? Jesus! What about Swiss Franks? Gold? No, forget Gold! Too volatile!"
"You sure? Me, sure? You're kidding! Will this nonsense stop with the bail out package? What do YOU think?""You sure? Me, sure? You're kidding! Will this nonsense stop with the bail out package? What do YOU think?"
We have been turned into a global community of reluctant speculators.We have been turned into a global community of reluctant speculators.
But this is the timid speculation of survival.But this is the timid speculation of survival.
Stomach knotsStomach knots
Most of us are not looking for a profit but for the virtual mattress or safe, where we can park some money before the storm moves on.Most of us are not looking for a profit but for the virtual mattress or safe, where we can park some money before the storm moves on.
A friend of mine is seriously thinking of buying a few safes and stuffing the contents of her bank accounts into them.A friend of mine is seriously thinking of buying a few safes and stuffing the contents of her bank accounts into them.
It reminds me of a story I did in Japan in the late 1990s, when the country was reeling from deflation, 0% interest and the prospect of bank failures.It reminds me of a story I did in Japan in the late 1990s, when the country was reeling from deflation, 0% interest and the prospect of bank failures.
Millions of people thought it was safer to stash the cash at home, rather than leave it in a bank.Millions of people thought it was safer to stash the cash at home, rather than leave it in a bank.
That was Tokyo, the world capital of neighbourhood watch culture.That was Tokyo, the world capital of neighbourhood watch culture.
At the moment the inter-bank lending culture... is a bit like the epidemic of fear about unsafe sex in the 1980sAt the moment the inter-bank lending culture... is a bit like the epidemic of fear about unsafe sex in the 1980s
Can you imagine the armed burglary rates in Washington DC if we were ever inclined to turn our homes into bank vaults?Can you imagine the armed burglary rates in Washington DC if we were ever inclined to turn our homes into bank vaults?
Suddenly the phrase "we have not reached bottom yet" has acquired a very tangible meaning.Suddenly the phrase "we have not reached bottom yet" has acquired a very tangible meaning.
How long will this crisis drag on?How long will this crisis drag on?
What is the real value of my house?What is the real value of my house?
And so on.And so on.
All questions that induce vertigo and a knot in the stomach.All questions that induce vertigo and a knot in the stomach.
I am no economist and I can barely tell the difference between a buy-out and a take-out but you do not need to be Robert Rubin or Larry Summers to grasp what is going on here: a total erosion of trust.I am no economist and I can barely tell the difference between a buy-out and a take-out but you do not need to be Robert Rubin or Larry Summers to grasp what is going on here: a total erosion of trust.
The people have stopped trusting their political leaders and the institutions that are supposed to safeguard our prosperity.The people have stopped trusting their political leaders and the institutions that are supposed to safeguard our prosperity.
Psychological signalPsychological signal
When the bank that I have been parking my money with ever since I have had any money is telling me that its house is "safe and sound", I simply do not believe them.When the bank that I have been parking my money with ever since I have had any money is telling me that its house is "safe and sound", I simply do not believe them.
After all, it was a small London branch of AIG - 187 employees out of 130,000 - that was allowed to go off the reservation, made some spectacular profits and then brought the world's largest insurance giant to its knees.After all, it was a small London branch of AIG - 187 employees out of 130,000 - that was allowed to go off the reservation, made some spectacular profits and then brought the world's largest insurance giant to its knees.
So the sensible advice is to diversify. In the last few weeks I, the quintessential fiscal monogamist, have become promiscuous.So the sensible advice is to diversify. In the last few weeks I, the quintessential fiscal monogamist, have become promiscuous.
I am flirting with banks who I had always kept at arm's length.I am flirting with banks who I had always kept at arm's length.
Since I do not trust any one of them completely to look after my nest egg, I am spreading myself thin.Since I do not trust any one of them completely to look after my nest egg, I am spreading myself thin.
I just hope I can remember where the money has been parked, when/if this is all over.I just hope I can remember where the money has been parked, when/if this is all over.
It is precisely because of this insecurity that lawmakers are now suggesting that the FDIC rate for guaranteeing deposits in American banks should be raised from $100,000 to $250,000.It is precisely because of this insecurity that lawmakers are now suggesting that the FDIC rate for guaranteeing deposits in American banks should be raised from $100,000 to $250,000.
It looks as if that will be a vital component of any deal.It looks as if that will be a vital component of any deal.
Even for people who do not have that kind of money this sends a psychological signal that the deposits - the bedrock of the banking system - will be honoured.Even for people who do not have that kind of money this sends a psychological signal that the deposits - the bedrock of the banking system - will be honoured.
It is an important step for restoring trust not just between banks and their customers but also between banks and each other.It is an important step for restoring trust not just between banks and their customers but also between banks and each other.
At the moment the inter-bank lending culture, where activity has virtually frozen, is a bit like the epidemic of fear about unsafe sex in the 1980s when Aids first erupted.At the moment the inter-bank lending culture, where activity has virtually frozen, is a bit like the epidemic of fear about unsafe sex in the 1980s when Aids first erupted.
The banks are not sure who among them carries the virus of bad loans.The banks are not sure who among them carries the virus of bad loans.
Institutions are reluctant to come clean with each other for fear of being ostracised with a run on their bank.Institutions are reluctant to come clean with each other for fear of being ostracised with a run on their bank.
Fiscal intercourse has stopped.Fiscal intercourse has stopped.
Only the administration can provide the legal framework for safe financial sex by using its rescue package to sweat out the bad loans and failing banks.Only the administration can provide the legal framework for safe financial sex by using its rescue package to sweat out the bad loans and failing banks.
I do not wish to be flippant, but you get the point.I do not wish to be flippant, but you get the point.
No one likes the bail-out package.No one likes the bail-out package.
But when has anyone ever liked taking medicine?But when has anyone ever liked taking medicine?
The priority is to save the patient.The priority is to save the patient.
Matt Frei is the presenter of BBC World News America which airs every weekday at 0030 BST on BBC News and at 0000 BST (1900 ET / 1600 PT) on BBC World News and BBC America (for viewers outside the UK only). Matt Frei is the presenter of BBC World News Americawhich airs every weekday at 0030 BST on BBC News and at 0000 BST (1900 ET / 1600 PT) on BBC World News and BBC America (for viewers outside the UK only).
Send us your comments in reaction to Matt Frei's Washington diary using the link below:
Send your comments