Americans' overall trust in the nation's financial system has dropped to 20%, a level that matches the lows recorded during the heart of the financial crisis in late 2008, according to the latest results from the Chicago Booth/Kellogg School Financial Trust Index. That represents a drop from the 26% trust level measured at the end of 2010.

Index co-founder and economist Luigi Zingales at the University of Chicago says he was surprised to see the sudden and dramatic dip, and suggests it may represent the psychological shock that followed the March earthquake and tsunami in Japan, which occurred just before the survey was taken. In 2010, trust had been slowly trending upward, according to the index, which Zingales created with Paola Sapienza, a finance professor at Northwestern University's Kellogg School of Management. Even so, the figures are still well below the overall level of trust from before the financial crisis, he notes.

"It shows how fragile and temperamental the country's financial system is right now," Zingales says. "It offers insight into how global catastrophes can affect Americans' trust in financial institutions."

Trust in financial institutions is a key ingredient for market development, the economist explains. "It is an expectation about how much you can trust and engage in a situation without being taken advantage of," he says. More than half of Americans believe the stock market will drop by a third in the next year, the survey also showed.

Another index trend shows that, despite an overall decline in trust for financial institutions -- especially ones in which the government has a stake -- there is more trust in smaller financial institutions such as credit unions and local banks. For investors, the reduction in trust will translate into fewer investments in complex securities or equities, and more investments in cash or cash-like instruments, Zingales says.

Catherine New is a reporter with the Huffington Post Media Group.

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vanvlou

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May 22 2011 at 11:30 PM Report abuse rate up rate down Reply
jkennedy806

You know it's bad when even Europe wants the US out of IMF affairs. This week, Timmy Geithner's shorts are all in a twist cause the IMF wants a European (another french citizen) in the top ranking post. Get the IMF and the World Bank out of the US. Move it to France. Out of control of Wall Street. I don't care move it to Germany they are the strongest world economy with China second. It's that hope and change thing this country's on. Except the world isn't buying it -- do you blame them? Seems like no one trusts US banks, the US citizens and the world -- great going Washington.

May 20 2011 at 10:16 AM Report abuse +1 rate up rate down Reply
1 reply to jkennedy806's comment
Samir semaan

the public do not trust the banks and that because they do not help refinance or lending small business owners money because they can get it from the government. Very soon the money will be shallow and the consumer will be in charge but the real problem will the government continue to have the money to spend or default on the national debt that is why the office of anticorruption must be established and caps on spending should be put in place for social services and medicare or medicaid all these programs needed for whom is necessary .

May 20 2011 at 1:02 AM Report abuse rate up rate down Reply
bigwingnut

Let's see...why don't we make up a statistic and then tell the world that the sky is falling when it varies. Great way to get you name in the papers!

May 19 2011 at 11:05 PM Report abuse rate up rate down Reply
vrosen

banks deal in money. they give nothing away for free. (except that toaster in the 50's) however, alot of the criticism leveled at banks from homeowners is a little unfair. when you sign a mortgage document, it has been spelled out very completely on what you will pay. it is the mortgage company which usually causes the last minute charges and rate hikes. think about it, when you buy a home for 100g's and then sell it for 600g's 20 years later, the bank has to keep the original interest rate and principal owed agreement. so why is it that when your home goes down in value, people expect the bank to lower their principal and interest rate? it is tough but people need to have some integrity in tough times. if u cannot pay, u can walk away. if u can pay, the value will return over time.

May 19 2011 at 1:21 PM Report abuse rate up rate down Reply
jkennedy806

Suggested reading for all US citizens the Declaration if Independence and the US Constitution. After that, the Federalist Papers and the Magna Carter as well, should keep anyone busy. Turn off the tv and put your nose into a book.

May 19 2011 at 12:40 PM Report abuse +1 rate up rate down Reply
1 reply to jkennedy806's comment
jkennedy806

Ancient words of wisdom
"The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest (we) become bankrupt." "The enemy is within the gates; it is with our own luxury, our own folly, our own criminality that we have to contend." Marcus Tullius Cicero 106 BC - 43 BC

May 19 2011 at 11:36 AM Report abuse +1 rate up rate down Reply
2 replies to jkennedy806's comment
jkennedy806

Well what do you expect -- the customer's don't trust the banks cause the banks are treating US fair? Good will best management practices, excellent customer service oh please, can you say Business fundametnals 101 you need to go back to school and get an education on principles of business management

May 19 2011 at 11:18 AM Report abuse +1 rate up rate down Reply
1 reply to jkennedy806's comment
chrsahrns

Banks have a history. They punish the unworthy and and exploit the ones who try to live up to the standards they create. It's a one sided relationship for only expert bankers to be good at and outsiders make them wealthy. Now trust that.

May 19 2011 at 11:07 AM Report abuse rate up rate down Reply
daveswrath0704

why should people trust bank BOA said they have 5 billion on the SIDE to pay for a fine they will get for the way they took home a way from people just show they dont care and show how much money they have to give way and not care and all the laws suit they are trying to get out of if they were up and up there would be NO LAWS SUIT but they fight just to keep the money that not there to keep !!!!!!!!!!!!!!!!!!!!!!!!

May 19 2011 at 10:57 AM Report abuse +2 rate up rate down Reply