Yes...but. People say this like it's a guarantee that insolvency won't catch up to them before the public panics, i.e. a bank run. I don't believe that's corre

Yes...but. People say this like it's a guarantee that insolvency won't catch up to them before the public panics, i.e. a bank run. I don't believe that's correct. Insolvency seems strictly worse than being solvent. As a depositor, if I don't see anyone else participating in a bank run, assuming the institution is solvent, then I have no reason to. But if I know they are insolvent, even if nobody else in the world does yet, I have an incentive to immediately start a bank run, unless, say, there are bankruptcy proceedings right away that freeze everything. It's the difference between musical chairs with one chair removed vs not.