Also, it's not even that debt isn't liquid; debt (much like corporate stocks, bonds, etc.) is very liquid. It's just not something you want to be forced to exit

Also, it's not even that debt isn't liquid; debt (much like corporate stocks, bonds, etc.) is very liquid. It's just not something you want to be forced to exit prematurely. So it's not even that the bank can't pay out, it's just that it costs them a little extra.