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At least in the modern economy, people aren't running to withdraw cash. They just transfer it to another bank. So the strongest major banks are probably impervi
by lend000 4y ago
At least in the modern economy, people aren't running to withdraw cash. They just transfer it to another bank. So the strongest major banks are probably impervious to runs, because if there is a general panic (rather than a panic at a specific bank), it will result in a dilution of funds between a number of major banks, rather than a net exodus of funds from the banking system.
- twblalock 4y agoFrom the point of view of an individual bank it doesn't matter if the money stays "in the system." The only thing that matters to that bank is that they have enough reserves on hand to cover the amount being withdrawn on a given day. It doesn't matter where that money goes. For any large bank, there is an amount of withdrawals that can take it out. And that amount is nowhere near 100% of deposits.
- lend000 4y ago> The only thing that matters to that bank is that they have enough reserves on hand to cover the amount being withdrawn on a given day. It doesn't matter where that money goes. As I specified in my original comment, a systemic panic, rather than a specific panic at a single bank would result in mass withdrawals, but a roughly equal number of deposits (from panic withdrawals from other banks), because we live in a largely cashless society. That is the point. The system isn't crashing down. A niche bank like SVB was always more liable to have a run and should have been better capitalized than a normal bank. This is because probably close to 100% of their clients had other primary bank accounts that they could instantly transfer funds to, whereas an exodus from something like Wells Fargo would require tons of people to set up a new bank account.