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people seeing a bank fail will worry that their own bank could fail, which could lead them to withdraw en masse which will cause their own banks to fail, and so
by dyno12345 4y ago
people seeing a bank fail will worry that their own bank could fail, which could lead them to withdraw en masse which will cause their own banks to fail, and so forth. this scenario is bad for everyone.
- jonhohle 4y agoWe just lived through this 15 years ago, and that’s not what happened at the time in a situation where many, many more banks were exposed to significantly higher risk. SVB had a short-term liquidity crisis, followed by botching a funding round to solve the crisis (along with some internal issues). They were a relatively small bank whose assets likely would have been gifted to another bank in exchange for covering the liabilities.