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> even if only half of their depositors withdraw their funds yes, obvious consider which business wouldn't be at risk of closing down when half of their custo

> even if only half of their depositors withdraw their funds yes, obvious consider which business wouldn't be at risk of closing down when half of their customers run away _at nearly the same time_. similar consider which liquidity focused/dominated business would be at risk of they randomly lose half their liquidity the only reason why it's "only" nearly 180 banks is because many banks are as much or more focused on "other" money business then things like deposits (e.g. land)

detourdog 4y ago
We have a local community bank. The bank served the needs of a single small New England town and small liberal arts college. Starting with 80's and 90's the banking deregulation caused the bank to start working the college's endowment to the point where the Financial Services part of the bank felt compelled to buy the banking services arm. Needless to say banking services became unusable. The best example is an 8 year old child had their birthday account become a deficit for not maintaining a minimum balance. Plenty of tears were shed as the mother tried to explain to child the bank didn't take all your money...
- timcavel 4y ago
  [dead]
coliveira 4y ago
For banks, this scenario is much more probable than you think. The US treasuries is paying much more than banks can pay, so people just need to move their bank balances to treasury bonds and their deposits will go puff!
- xiphias2 4y ago
  This is the point when banks are starting offering higher rates themselves to depositors.
  - nathanaldensr 4y ago
    But the banks themselves have to be able to exceed those returns in order to actually pay out interest to depositors and make money for their shareholders. That's not an easy task in this environment; everyone's chasing safe yield.
SilasX 4y ago
>similar consider which liquidity focused/dominated business would be at risk of they randomly lose half their liquidity Except, the way banking is set up in the US, there exists a lender of last resort (the Federal Reserve) that can step in to replace that liquidity, if the bank is really solvent -- and even then, that's assuming other banks won't lend to it. So yes, I except 50% of funds being withdrawn to be survivable if the banks is otherwise solvent.
rajin444 4y ago
> consider which business wouldn't be at risk of closing down when half of their customers run away _at nearly the same time_. Almost all businesses that fail do not take their customers life savings with them when they fail. That same life savings that’s being used to profit off interest bearing loans and risky investments at a disproportionate benefit to the bank.
- deleted 4y ago
  [deleted]
- lotsofpulp 4y ago
  People might consider them savings (and they can, because feds explicitly guarantee a certain amount, and implicitly more), but they are actually investing their savings, which means a possibility of loss. Even your savings in your home without a bank have a possibility of loss due to things like theft or pests or natural disaster. Or more commonly, inflation.
steve1977 4y ago
Except the main job of a bank is (was) to deposit my money and give it back to me when I want it back. I’m not providing “liquidity” - I am depositing my money. (I know of course that’s not what banks are primarily do today - which is probably one of the root causes of all these problems)

detourdog 4y ago

We have a local community bank. The bank served the needs of a single small New England town and small liberal arts college. Starting with 80's and 90's the banking deregulation caused the bank to start working the college's endowment to the point where the Financial Services part of the bank felt compelled to buy the banking services arm. Needless to say banking services became unusable. The best example is an 8 year old child had their birthday account become a deficit for not maintaining a minimum balance. Plenty of tears were shed as the mother tried to explain to child the bank didn't take all your money...

timcavel 4y ago
[dead]

coliveira 4y ago

For banks, this scenario is much more probable than you think. The US treasuries is paying much more than banks can pay, so people just need to move their bank balances to treasury bonds and their deposits will go puff!

xiphias2 4y ago
This is the point when banks are starting offering higher rates themselves to depositors.
- nathanaldensr 4y ago
  But the banks themselves have to be able to exceed those returns in order to actually pay out interest to depositors and make money for their shareholders. That's not an easy task in this environment; everyone's chasing safe yield.

SilasX 4y ago

>similar consider which liquidity focused/dominated business would be at risk of they randomly lose half their liquidity Except, the way banking is set up in the US, there exists a lender of last resort (the Federal Reserve) that can step in to replace that liquidity, if the bank is really solvent -- and even then, that's assuming other banks won't lend to it. So yes, I except 50% of funds being withdrawn to be survivable if the banks is otherwise solvent.

rajin444 4y ago

> consider which business wouldn't be at risk of closing down when half of their customers run away _at nearly the same time_. Almost all businesses that fail do not take their customers life savings with them when they fail. That same life savings that’s being used to profit off interest bearing loans and risky investments at a disproportionate benefit to the bank.

deleted 4y ago
[deleted]
lotsofpulp 4y ago
People might consider them savings (and they can, because feds explicitly guarantee a certain amount, and implicitly more), but they are actually investing their savings, which means a possibility of loss. Even your savings in your home without a bank have a possibility of loss due to things like theft or pests or natural disaster. Or more commonly, inflation.

steve1977 4y ago

Except the main job of a bank is (was) to deposit my money and give it back to me when I want it back. I’m not providing “liquidity” - I am depositing my money. (I know of course that’s not what banks are primarily do today - which is probably one of the root causes of all these problems)