re: Bannon is reporting Wall Street Journal warns another 180 banks are susceptible...

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let's say if more than 5-10% of high net worth depositors made a bank run? I can't imagine if less than 5% of a banks deposits were withdrawn it would collapse, if that's not true the whole banking system is full blown retarded.

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Christopher Flowers, the billionaire founder of the private-equity firm J. C. Flowers & Company and a self-described “lowlife grave dancer” with an eye for failing banks, found himself, Zelig-like, in the midst of the week’s dealmaking. Slender, bespectacled, and rumpled, Flowers was a math whiz who liked chess, and those skills made him a formidable opponent in the intricate moves of financial takeovers—in some cases as an adviser to firms doing deals, in others as an actual investor. Flowers knew Paulson well, having spent twenty years at Goldman Sachs, and had worked with Bank of America officials in the merger with NationsBank.

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The risk to A.I.G. from the huge portfolio had seemed minimal, since the likelihood of default in any given transaction was low. As a result, A.I.G. hadn’t hedged its own exposure to its swap portfolio, and was earning enormous profits on the business. But during the summer of 2008, as increasing numbers of borrowers became unable to pay their mortgages, default rates rose. The U.S. ratings agencies began a wholesale downgrade of mortgage-backed securities, triggering demands that A.I.G. provide ever-larger amounts of collateral to buyers of its swaps. It wasn’t clear how A.I.G. could come up with the cash.

When Flowers and a group from his firm arrived, dozens of investment bankers, private-equity investors, and A.I.G. officials were meeting in various conference rooms. Flowers and his team were given their own conference room, where they and some A.I.G. finance officers examined a spreadsheet, tracking the parent company’s cash flow and liquidity. The cash-flow projections showed A.I.G. to be in dire need of capital. It was facing a $6-billion cash shortfall by the following Wednesday, a figure that would rise to $25 billion the next week, and $39 billion the week after that.

Flowers looked up from the figures. “Bankruptcy,” he said.

“Wait a minute,” one of the A.I.G. finance officers replied. “Let’s don’t be alarmist.”

“All I know is if you don’t pay six billion next week you’re going to have some very unhappy people,” Flowers replied.

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Geithner again broke the group into teams, saying that they would reconvene in several hours. When they did, the bankers reported that they were thinking about establishing a revolving line of credit to support other banks that might find themselves in Lehman’s predicament. But Geithner had asked them to focus on Lehman. “You guys have got to try harder!” he insisted. Throughout the day, when members of the various groups passed in the Fed corridors, they asked one another, “Are you trying harder?” John Thain, of Merrill Lynch, worried, like the others, that a resolution of the Lehman crisis would just shift the crisis to the next most vulnerable bank, which might well be Merrill.

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As chance would have it, while the New York Fed was addressing its severest financial challenge since the Depression, the tenth-floor offices of the president were being cleared of asbestos and renovated. Geithner and his staff were working out of temporary quarters on the thirteenth floor that looked, as one visitor described them, like “a Toledo Ramada Inn.” That morning, they met with the ubiquitous Christopher Flowers and senior officials from Bank of America, who were there to discuss the Lehman takeover. They had stayed up all night scrutinizing Lehman’s books, and the picture had got worse. One Bank of America official told Paulson and Geithner, “We can’t do this without you.” He suggested that the government back about $60 billion of Lehman’s troubled assets. When Flowers was leaving, he turned to Paulson. “By the way,” he said. “Have you been watching A.I.G.?” “Why, what’s wrong at A.I.G.?” Paulson asked. Geithner had mentioned that there were some liquidity issues, but Paulson had heard that the New York State insurance commissioner was stepping in, and that a private-sector solution was taking shape. “Well, you should take a look at this,” Flowers said, and pulled out the spreadsheet he’d got from A.I.G. the day before. They went back into the office, and Paulson examined the numbers. Flowers pointed out the looming multibillion-dollar “shortfall.” “Oh, my God!” Paulson said.

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