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.
Related or Semi-related Video
Finance: What is a Banker's Acceptance N...205 Views
Finance a la shmoop, what are bankers acceptance notes and cashier's checks ok
so bankers acceptance note what is it well it's kind of a t-bill but with [Guy holding up the note]
fewer calories that is a bank takes on the risk or promise of a future payment
to be made to a creditor and it's you know backed by the bank and it's kind of [The bank and government building behind the note]
backed by the federal government sorta sound weird well it is bankers
acceptance notices are generally used in foreign trade where the two parties well
just don't trust each other think about it like an escrow account when you buy a [People taking out a for sale sign]
home the funds get released once it's confirmed that the home does not in fact [Bars covering a vault of money open]
have nuclear waste under it the gal who says she's the owner of the home is in
fact the owner and the forward costs of taxes have all been paid like it's a [Escrow account checklist]
good sale the home's legally available to be sold in fact and after all the [Sold sticker is put on the sale sign]
boxes have been checked well then the money releases from the bank to the
seller and all's good while bankers acceptance notes work in [Money going to a person from the bank]
the same fashion like the shipment of Chinese tow traps way more comfortable
than the finger version was in fact found and picked up at the loading dock [Someone putting their finger into the trap]
brought back to the factory and you know tested on chimps sorry Pete oh we're
just keeping it real at that point the bank pays the foreign bank and while [Protesters]
everyone's happy ish why pay the extra fees for a system to work this way like
banks don't pay banks for free well because banks generally quote know each
other unquote better than individuals know
each other across foreign borders US banks trade with banks in whatever Stan [Money going across a map of the Earth]
all the time even when US banks have no idea where whatever stand is or what it
whatever stands for then you've got the kissing cousin of the bankers acceptance
note the cashier's check well the cashier's check is guaranteed
by the bank and drawn against the bank's own cash reserves that check is signed
by a cashier as if the bank itself is buying whatever product is being paid
for with a cashier's check the bank is the entity fully responsible for paying [Tow traps going to the bank]
that amount and because of this quote extremely guaranteed safety unquote
cashier's checks are common in complex or expensive transactions like buying a
home or setting up an initial brokerage so that the odds of the monkey business
happening when it comes time to collect the bananas are low and this is why [Monkeys running around with bananas]
like bananas cashier's checks have appeal... [Guy holding a banana skin in one hand and a cashier's check in the other]
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