How to Destroy a Bank

By way of Yves Smith, we come across Eddie Braverman's (a blogging pseudonym) advice on how to take out a major bank (Warning: the link is to an article in Playboy (really); half-naked women in the sidebar are probably not work safe):

Step one: Give the plan a recognizable name. Like many ex-commodities brokers, Eddie appreciates action. A few months after he published his plan, he told me about it from the security of a Parisian café: "You could call it Tank-a-Bank or Flashrun or Bankbusters. Give it a name that tells people they're signing up for direct action, with one bank chosen to fall if the public's demands are not met." Tank-a-Bank is the name he used in his plan.

Step two: Recruit. Gather online signatures, using three compelling demands. Eddie chose changes he believes in: lower banking fees, greater leniency in home foreclosures and the separation of investment banking and consumer banking.

Tank-a-Bank, as Eddie envisioned it, allows website visitors to take instant action. They pledge to take part in the run if their particular bank is chosen. They input a user name, location and estimated amount of withdrawal. This anonymous database protects consumer privacy while allowing the flash-mob organizers to manage the run.

Step three: Activate media. Using his database of Tank-a-Bank partisans, Eddie asks a small percentage of them to attend flash-mob protests outside banks in New York, California and Illinois. Local media coverage turns national, with the organizers on the squawk shows and radio call-ins repeating the name (Tank-a-Bank!) and disseminating their demands. Every new recruit strengthens Tank-a-Bank's bargaining power, while every conversation about the health of the banks weakens the banks' stability.

Step four: Physically deliver a list of demands to the four banks, and begin the countdown. This reminds the banks that though four are being pressured, only one will be chosen. The countdown ends with a month-long window, the exact date and target remaining secret until the last possible moment. At each step the plan remains unpredictable. Institutions are thus forced to prepare for an event with no way of knowing when, where or how it will occur.

Step five: Now comes a broader form of pressure. One month before the flash-mob runs, protests, publicity stunts and e-mails warn regulators and members of Congress that they should not save the selected bank. The Federal Reserve responds aggressively, but financial markets likely remain in turmoil as long as there are doubts about the government's response.

Step six: When the countdown ends, the date range for the run begins. Tank-a-Bank could strike any day, at any of the four banks. Countdown clocks in downtown Manhattan flash a line of red zeros, reminding everyone the hammer could fall at any time. The question is no longer if the run will happen but which bank it will happen to. If you're participating, you've already withdrawn enough cash to last until your next paycheck (or, more likely, transferred part of your checking account to a local bank). You watch news of falling share prices, the angry Federal Reserve, the depressed markets. Maybe some networks even demonize Tank-a-Bank. A few legislators may call you names--socialist!--or try to prosecute the organizers.

Step seven: The bank run is announced on a live webcast at 11:00 a.m. EST, midweek. The chosen bank is declared, and participating "tankers" are sent to specific branches. People close their accounts in person, creating long lines. You arrive early at your bank and spend most of the morning either trying to get money out or waiting in line to do so. The twinge of guilt you feel as other customers join the mob to try to get their money out could foreshadow violent confrontations between Tank-a-Bankers and those consumers locked out of their accounts. Fringe groups may smash windows at some banks, while other locations are locked down by police. This is where Eddie's plan ends, with a glib comment: "Then pick the next one and start over."

(the whole article is worth a read, half-naked women notwithstanding)

When this was posted, it completely freaked out Wall Street. As Braverman notes, however:

I learned a long time ago that bullies only respond to strength. You want the banks' attention? Put one of them in the morgue. Anything else is a minor inconvenience to them.

I find it all the more ironic, because this is exactly what the other investment banks did to Bear Stearns--it was a run on the bank (although, in that case, it was the lack of overnight repo funding that killed Bear Stearns).