Topic: Can bitcoin fill the void in a bank run? (Read 3612 times)

Maybe it's my work browser but your link takes me to some foreclosure website which doesn't look like what you intended to show.

Washington Mutual was the largest bank failure in history but the cost to the agency was zero.  Yes, some of the bank failures cost the Deposit Insurance Fund but in turn all other banks pay higher premiums.  If failures exceed what's available in the DIF, the FDIC has a line of credit with the Treasury it can tap into.  I believe the only time the FDIC tapped into the line was in the early 1990s.

The bank failures we are seeing right now are small, local banks for the most part.  Nothing like what we were seeing ~2008.  Don't get me wrong, I'm not saying the FDIC has the means to cover a systemic bank failure, they don't.  But the current bank failures are not really putting the FDIC in jeopardy.  If that were the case, we'd already see a run on banks.

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

AHHHHH, don't lie to these people that FRN is not backed by anything. it is backed by none other than guns.

The banks have more liabilities than assets, which is why they get taken closed down by the FDIC in the first place. Yes, other banks buy the deposits, AFTER the FDIC adds enough cash to make the purchase worthwhile.  You really should read the press releases that detail how much the bank failure costs the fund.

More info at calculatedrisk.com

Zerohedge is the best econoblog on the Web, IMHO- certainly the most subversive. The blog owner uses a psudonym to promote free speech, the same way the authors of The Federalist Papers did.

Zerohedge is the Wikileaks of Wall Street.

More info at calculatedrisk.com

Failing banks have had their deposits purchased by other financial institutions.  They're not depleting the FDIC fund.  The only issue with the FDIC is it's reserves are only a fraction of their outstanding obligations so a widespread bank run would deplete the fund.  But the banks currently failing right now are not doing anything to those reserves.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

The FDIC has almost no money. The banks that fail every Friday like clockwork have depleted the insurance fund completely. Sheila Bair is operating off of a 500 billion line of credit with Treasury, which will not be nearly enough to prevent a bank run should a TBTF go down.  Increasing that line of credit literally requires an act of congress, meaning it wouldn't happen in time to do any good. Besides, Treasury is Broke too.


Bank runs are always, always deflationary, but the big financial crisis may not be a bank run. It depends on how much liquidity the FED provides. Too much and the ship alters course from Japan to Zimbabwe.

Because of the FDIC the next bank run will be different. It won't be a mad dash to get dollars, we can get those for sure. It'll be a dash to get value for our dollars. There is and can be no guarantee on that. I suspect people who have no more room for cans of beans and toilet paper will try to get some of their wealth through the crisis in gold and bitcoin.

You're taking your advice from an article writen by "Tyler Durden"?

Wait, I thought FDIC, or federal deposit insurance, that banks actually pay premiums into, is where the money to cover bank runs comes from, not newly printer dollars?

Wait, I thought FDIC, or federal deposit insurance, that banks actually pay premiums into, is where the money to cover bank runs comes from, not newly printer dollars?

Yes, but the point is that they don't have that much physical cash on hand to meet the demand. Cranking up the printing presses requires some lead time. During that interim period banks would likely shut down and barter would be order of the day. But I could be wrong...

@cypherdoc: Yes, I too was amazed to see the the USD and Treasuries soar while gold and silver plummeted during the '08 crisis but the next time around (as alluded to in the article) it would be the dollar itself that gets broken. It wouldn't be its' own "safe-haven".

I see how there could be demand for physical dollars but the reason there would be a demand is so that people could get out of them and convert them into a stronger currency. So what I see, in the scenario described in the article, is that the physical dollar would still drop against all other currencies (otherwise there wouldn't be a bank run in the first place) but the digital dollars would drop dramatically more in value.

A recent example is Argentina during the debt default of 2000. The peso lost 60% +/- against the dollar. There was still a huge demand for physical pesos but the banks simply closed while the value of the peso continued to drop. Physical cash virtually disappeared and people had to resort to barter if they didn't have US dollars or pesos to trade with.

So this time around the dollar wouldn't be the "safe haven", it would be what everyone is trying to get out of. Because of this I can see bitcoin and precious metals rising significantly as the new "barterable items of choice" since most Americans don't hold other currencies (at least in Argentina a lot of people held US dollars). But I could be missing something.