I live in Portland, Oregon, and a lot of my friends have accounts with Washington Mutual, given its roots in the Pacific Northwest (WaMu was founded in Seattle over 100 years ago). Most of my loved ones' accounts aren't anywhere close to FDIC limits. But I've been getting the question almost every day: Should I take my money out of WaMu?

[Update, September 25, 10:30 p.m.: Tonight's takeover of Washington Mutual by J.P. Morgan may negate this advice; tellingly, $16.7 billion of your deposits were taken out in the past 10 days.]


The responsible capitalistic economist in me says "no" but the objectivist says "yes." And if I was talking to my closest friends and relatives, and not the U.S. as a whole, here's what I'd argue: sure, the last thing that would be sensible would be for every WaMu accountholder to panic and take his or her money out. We'd be left with way more than the crisis we have today; the FDIC wouldn't have assets enough to pay all the accountholders and there would be an awful mess (requiring more Federal bailing out). But.

But, if it's just you we're talking about, you should put your money somewhere you can have much higher confidence in the bank's management for using conservative lending standards and a customer-focused investment strategy. Somewhere like a small, local credit union. Credit unions operate as cooperatives, and the members (i.e. accountholders) own the bank. There are no shareholders other than you all to answer to. Bank policies, like overdraft fees, are not calculated for maximum profit, but for fairness. If there's a lot of money made it goes back to the accountholders. You aren't paying for anyone's estate in the Hamptons or corporate jet; with less highly-paid management, you have far less need for them to take huge, barely-understood risks with barely-legal securities.

If you asked me as a friend, I'd tell you, put your money somewhere you feel safe. And today, I don't feel safe about Washington Mutual.