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Tom Howard

Jan Quintrall, president of the Better Business Bureau serving Montana, western Washington and northern Idaho, shares a story about the desperate and illogical ways that people have reacted to the recent international financial crisis.

A local banker Quintrall knows said that a customer marched into the bank one day and demanded to withdraw all of his savings, about $900,000, saying he no longer trusted the financial system. Of course the bank complied, even though it had to jump through a number of regulatory hoops in order to come up with that kind of cash, Quintrall said.

Does this sound a little crazy? You bet.

Is it widespread? Fortunately, no.

But it helps illustrate the emotional reaction that some people have experienced during the financial crisis.

Local bankers say the gut-wrenching turmoil that has gripped Wall Street in recent weeks has spurred at least some interest in financial havens such as certificates of deposit. But it may be too soon to determine whether that interest translates into a full-fledged exodus from stocks and bonds and toward bank CDs.

"The interest rate used to be the determining factor that people looked at. But now people are looking at security as well as the rate," said Jay Jensen, president of Yellowstone Bank on King Avenue West.

Jensen said some investors are taking a closer look at CDs in the wake of the international crisis that sent financial markets reeling.

"People haven't been lining up outside our door, but there has been some movement," he said.

You may know somebody who has pulled money out of stocks and bonds and is now shopping for safer investments in the wake of the international financial crisis that unfolded in September and continued well into October. Even money market mutual funds, widely considered a safe short-term investment, have lost their luster.

Lyle Knight, president and chief executive officer of First Interestate BancSystem, said the company's bank deposits have been growing, but it's too soon to explain the reasons behind the trend.

Clearly, there's evidence that a flight to safety is occurring in the wake of the financial crisis, Knight said. One factor that will boost interest in bank CDs is that yields on U.S. Treasury bills have been near zero in recent weeks, he said.

"Banks are still seen as a safe place to put money," Knight said.

One thing that banks have going for them in these uncertain times is that deposits are insured against losses by the Federal Deposit Insurance Corp. Jensen and Knight agree that the decision to temporarily boost FDIC insurance on bank deposits from $100,000 to $250,000 will add an additional level of comfort for security-conscious investors.

But some experts don't anticipate a big stampede toward bank CDs despite the turmoil in the financial markets.

"CDs may be a safe haven in this financial mess, but you're probably getting a negative return in this financial mess thanks to inflation and low rates," according to Bank Rate Monitor's Web site.

Bank Rate Monitor's experts expect CD rates to remain at their current rate or possibly trend lower. While bank CDs remain a safe alternative in these uncertain times, the price you pay for that safety is a lower return.

And the guy who pulled his money out of the bank? Let's hope he invested in a nice secure safe.