Could the Government Stop You From Pulling Cash From Banks? Money Expert Lays Out His ‘Panic’ Scenario
Written by
David Nadelle
Edited by
Cory Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Following the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, Americans are understandably worried about bank stability and whether or not it’s dangerous to trust banks with their money. According to a hedge fund guru Hugh Hendry, investors have every right to be in panic mode.
Hendry, Eclectica Asset Management founder, luxury property manager and in-demand financial commentator, fears that the flood of investors pulling from the M2 supply of money — cash, checking deposits and other types of deposits that are readily convertible to cash such as CDs — may eventually force the government and Federal Reserve to consider placing withdrawal sanctions on Americans. “I would recommend you panic,” he said.
“That could reach a crescendo where the Treasury and the Fed may have to come in and actually restrict your right as a U.S. citizen to pull money out of the U.S. banking sector,” said Hendry on Bloomberg Markets.
As we have been reminded of repeatedly during this current bank failure crisis, up to $250,000 per depositor is safe at financial institutions that are Federal Deposit Insurance Corporation (FDIC)- or National Credit Union Administration (NCUA) insured. This is true whether the bank or credit union is national, regional or local.
But desperate times call for desperate measures, and Hendry likens the current scenario to the Gold Reserve Act of 1934, a government program aimed at boosting the faltering U.S. economy through restricting the private use of gold.
Suggesting the Fed and Treasury resort to placing a “lock” or “gate” on banking deposits, Hendry stated, “I can actually conceive of a Federal or Treasury rule coming in, saying, ‘For the next 180 days, you can’t pull your money out of the banking sector.'”
In response to the present banking peril, Hendry, always unconventional in his thinking, thinks that Americans should potentially be looking outside the box, placing capital in ultra long U.S. Treasury securities, which despite being “the most reviled security in the universe,” are offering meaningful yields, and Bitcoin, which might have more upside than stocks both this year and in the future.
Writing about Hendry’s ‘panic’ scenario, Moneywise advised two other alternative assetst — real estate and gold, which both offer during times of high inflation or economic tension.
More From GOBankingRates
