So if you’ve ever heard of a bank run, that, a whole lot of that.
Banks “make” money by using the money in people’s accounts to make loans with the intention of being paid back with interest.
This is called fractional lending and seems like the slyest move ever until everyone learns not all their money’s in the bank anymore and everyone comes running not wanting to find out they were the account owner left holding the bag after everyone ahead of them depleted the available funds.
If in a bank crisis like there was in 2008 the government doesn’t organize a bailout, a lot of bank runs will happen.
Now for the average joe, there’s the social security system which will cover up to 100k in money lost in a bank collapse, so most folks aren’t gonna be royally fucked if this happens.
The problem is that when the crisis is big enough, the government now has the issue of there being no banks left standing to put everyone’s payouts into. Either because of their own bank runs or because they saw they wouldn’t get a bailout and either shuttered the doors or cancelled plans to open any new banks in this new state of affairs where banks can’t expect federal assistance in a random crisis event.
So if you’ve ever heard of a bank run, that, a whole lot of that.
Banks “make” money by using the money in people’s accounts to make loans with the intention of being paid back with interest.
This is called fractional lending and seems like the slyest move ever until everyone learns not all their money’s in the bank anymore and everyone comes running not wanting to find out they were the account owner left holding the bag after everyone ahead of them depleted the available funds.
If in a bank crisis like there was in 2008 the government doesn’t organize a bailout, a lot of bank runs will happen.
Now for the average joe, there’s the social security system which will cover up to 100k in money lost in a bank collapse, so most folks aren’t gonna be royally fucked if this happens.
The problem is that when the crisis is big enough, the government now has the issue of there being no banks left standing to put everyone’s payouts into. Either because of their own bank runs or because they saw they wouldn’t get a bailout and either shuttered the doors or cancelled plans to open any new banks in this new state of affairs where banks can’t expect federal assistance in a random crisis event.
In the US, FDIC insurance covers up to $250,000 for most depositors.
Just adding NCUA is the credit union equivalent for protection.