AN AGE OF BANK RUNS?

AN AGE OF BANK RUNS? Tyler Cowen at the Marginal Revolution economics site has a post on an article he wrote in the New York Times. He begins by saying that he asked some colleagues: “to identify the single most important development to emerge from America’s financial crisis. Most of us had a common answer: The age of the bank run has returned.” In my lifetime, it was thought that runs on commercial banks would not happen because of Federal Deposit Insurance. Now, there have been runs on nonbank financial institutions (Lehman). The common thread in runs is the urgency of getting your money out first. The risks are compounded because you can’t know whether an institution will be brought down by another institution’s failure. The MF Global failure makes it seem all the more urgent to get your money out early. It’s been 5 months since MF Global failed, and they still don’t know where the customer money went. Cowen says: “It now seems that the 21st century will resemble the 19th and early 20th centuries, with periodic panics and runs on financial institutions….”

This entry was posted in Economics, History. Bookmark the permalink.

One Response to AN AGE OF BANK RUNS?

  1. Either regulations will be put into place that will protect the investor, or the agencies who are supposed to oversee places of investment will be held criminally accountable. I can’t say they’d be accountable for the losses, because where’s the money going to come from to pay back bilked investors? But if the people who take responsibility to oversee the ethical use of investment money prove unreliable, as they have, perhaps long jail terms might give them an incentive to do their jobs effectively. I know I’m very ignorant, I’m just asking if this is feasible and just.
    I just read this over and it sounded very naive. How DO you protect the investor, or is it all just luck, if your money gets taken and disappears?

Leave a Reply

Your email address will not be published.