US banks report that common Americans rushed to withdraw their deposits in July. For the time being, the US financial well-being has to survive an apocalyptic public debt and a record-high budget deficit. Meanwhile, the banking sector is being challenged by a humongous outflow of deposits. According to estimates from the Federal Reserve, customers withdrew their deposits worth 78 billion in a single week in July. Interestingly, the banking system was hit by the frenzy of deposit withdrawals all of a sudden after a two-week quiet period.
Experts relate the exodus of depositors to the fact that large banks invested hefty funds in third parties. Banks adopted this approach to enable their intermediaries to attract new deposits. At the same time, banks warned their shareholders that lending institutions are obliged to comply with the requirements for raising interest rates and have to prevent further deposit withdrawals.
