Bank runs led to the creation of the Federal Reserve. It’s why we make banks fulfill reserve requirements, which means they can’t lend out all of their money. They have to keep a certain percentage liquid and on-hand. Because people want to take their deposits out of the bank...not just put them in the bank for the bank to lend.
A bank run occurs when there’s a rush of people to withdraw all of their money from their bank accounts. Since banks make money from lending it out to others, well...they don’t have the capacity to pay everyone at a moment's notice. So if all the depositors are demanding their deposits at the same time...that’s a problem.
Bank runs (back in the day, when they were more of an issue) happened in-person, on-foot, brick 'n' mortar style. Today, eh...why go to the bank when you could just deposit that check with your phone? You almost never need cash anyway, and when you do, you can just go to the nearby ATM.
Silent bank runs are new given today’s tech. Silent bank runs are just like normal bank runs, except they happen online via electronic and wire transfers. It’s silent, because it’s kind of a meltdown (as bank runs tend to be), but it’s kind of invisible. The banks see it happening on their computer screens, and consumers on the caboose of the bank run train will notice...but there just isn’t the mosh-pit scene there used to be. (Fwiw, the FDIC insures your accounts up to $100k if your bank fails to pay up.)
Thanks to big banks being irresponsible with mortgage-backed securities, leading to the 2008 financial crisis and the following Great Recession, silent bank runs happened. This makes sense given that markets also crashed, implying a sell-off. Everyone’s collecting all their money...taking it out of banks, out of the stock market. Protectionism time.
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Finance: What is a merchant bank?4 Views
What is a merchant bank? Well there's the theoretical manner
in which the merchant bank came to the party and that was largely by providing [merchant bank partying in a disco club]
payment options escrow currency hedges and other means of spraying wd-40 on the [merchant bank holding escrow papers]
international tracts when American corporations did business with merchants [WD40 sprayed on train tracks]
from other countries well the basic idea then was that a merchant bank lived and [foreign merchants shaking hands]
breathed the banking international transaction universe and knew every [banks play pong across world map]
trick in the book when dealing with shady countries who had hoped that they
could get some gullible American corporation to ship them twenty five
thousand yellow and orange rubber duckies with the squeaky sound thingies [rubber duckies getting squeezed in the tub]
yeah and then somehow abscond without paying well the duck seller was schooled
in molding rubber they were not schooled in international financial transactions
so back then it made perfect sense for the duck maker to hire the merchant bank [merchant bank enters screen with duck maker]
to deal with international escrow complexities far beyond their core skill
and the way they hired them is basically the merchant bank would discount the
bill that was owed to them and pay that money in cash in American u.s. dollars [money changing hands]
to that American corporation and the bank would then be responsible for [bank choking international seller]
collecting the full price and that spread between the full bill and what
they paid the American company was how they made money well in the process of
being deep in both the strategic operations of companies in the US and in
understanding how the global marketplace for Commerce work merchant banks evolved
into more or less one flavor or another of an investment bank helping clients [merchant bank bulding turns into investment bank]
sell debt and equity and other money raising devices so that they could
continue selling ducks or rakes or tractors or lawn flamingo's yeah those [rubber duckies floating by]
are cute in the modern incarnation of merchant banks while many are actually [merchant bank throws bags of money to businessman]
able to not just advise but invest in the companies to whom they are close all
kinds of other complexities live in the border-to-border transactions and [merchant bank sends money to Mexico]
because the personal relationships of the merchant bankers themselves ended up
getting so close to the management into the government's they do [group of government officials]
with into the competitive marketplaces well each of which carried enormous
friction and merchant banks and the bankers who run them have found
themselves in the middle of all kinds of commercial transactions yeah very
lucrative business today people if you want to whine about taxes go into this
one so today merchant banking is really more
like just banking with fewer regulations and a whole lot more upside when they're
right and of course the most successful merchant banks are the ones that you
know offer merch [merchant bank wearing merch clothes]
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