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The Truth About Bank Runs

  • George G. Kaufman
Part of the Innovations in Financial Markets and Institutions book series (IFMI, volume 1)

Abstract

Bank runs have taken a bum rap. A shout of “run” strikes the same fear into most of us as a shout of “fire” in a crowded room might. After all, it is better to be safe than sorry. Not only will depositors run to the affected bank to withdraw their funds, but depositors elsewhere may also run on unaffected banks. Bank runs are frequently viewed as contagious, with people thinking, “If my neighbor’s bank is in trouble, maybe mine is also.” Thus, a run on one bank is believed capable of causing not only that bank to fail but also, domino fashion, the failure of a large number of banks nationwide, thus destabilizing the financial system if not the economy as a whole.

Keywords

Banking System Federal Reserve Credit Union Deposit Insurance Market Discipline 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© The Casto Institute 1988

Authors and Affiliations

  • George G. Kaufman

There are no affiliations available

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