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Banks lend deposits. That's how they make their money. They have to keep some part of the deposits as a reserve. Real regulated banks have access to the Fed to
by oldgradstudent 4y ago
Banks lend deposits. That's how they make their money. They have to keep some part of the deposits as a reserve.
Real regulated banks have access to the Fed to borrow in a case of a bank run.
- mrep 4y agoAnd FDIC to de-risk customers from feeling they need to do a bank run.
- oldgradstudent 4y agoTo a large extent, but not completely. Anyone who has more than the insured amount, or anyone who needs their money in the near future will still engage in a run. There were several runs during the 2008 crisis, the most famous is the run on IndyMac Bank. https://en.wikipedia.org/wiki/IndyMac https://en.wikipedia.org/wiki/IndyMac