Question
Consider the financial crisis from 2007 to 2009 which was punctuated with a rash of bank failures occurring up to 2014 in the United States.Also
Consider the financial crisis from 2007 to 2009 which was punctuated with a rash of bank failures occurring up to 2014 in the United States.Also consider the banking regulations which were designed to control the money supply while ensuring the safety of depositors' funds.One key observation from the past two decades is that while there were several bank failures, these failures did not lead to runs on banks.In fact, if the government took over a failed bank with liabilities (mostly deposits) of $2 billion (for example), it would pay off the depositors, and sells the assets for $1.5 billion.
Why did these failures not lead to runs on banks?And with the specific example, where would the missing $500 million come from to complete the transaction?
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