HEMINGWAY ON BANK RUNS. One of the lessons of the last year is just how fast a run on liquidity can be. I once saw a fire in a ten-story building in New York City. It was surprising how quickly the fire moved. Hemingway in THE SUN ALSO RISES has some famous dialogue: “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” Bear Stearns, Lehman Brothers, FNMA and Freddie Mac—there was a warning period of several months, and things went very quickly.

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