“Bank runs, once they start, are difficult to contain, and they take down both weak and strong institutions indiscriminately. In the early 1930s the U.S. had to close thousands of solvent banks because they were unable to withstand the massive withdrawals of a frightened public. We learned the hard way that central bank lending was not enough to fend off a full-scale banking panic; thus, in 1934, the FDIC was born.”
— Sheila Bair: Former chair of the FDIC, and former member of the Basel Committee.
No, no, no… Fractional reserve banks are never solvent. The only thing that keeps banks solvent is a fantastical belief among depositors that their money is safe. A belief that is grades more ridiculous than a belief in God. I don’t know whether there is a God or not or, at least, it is impossible for me to completely disprove the existence of God. But I know for a fact that banks lend out far more money than they take in deposits.
What happened in the 1930s was a complete breakdown in this fantastical belief. Which meant all banks, weak or strong, were insolvent.
Is it not baffling how so many people with positions of respect and experience in finance can so completely misunderstand the banking system..?