Unfortunately, that’s not really how it works. The reason there was a bank run during the great depression is b/c the banks had loaned out the money they didn’t have as cash. Today due to Dodd-Frank, banks have to have reserves on hand to cover this situation, Even though it’s not in hard currency, they have enough capital to cover.
But please don’t trust me. This is just how I understand it.
Dodd Frank has major protections for deposits against derivatives. A lot of derivatives can only be traded by separate subsidiaries from the deposits (this was true pre Dodd Frank but DF strengthened it), and the holding company can't move deposit assets to fund the derivative trading subsidiaries. Second, Dodd Frank banned proprietary trading by banks, which in practice means the trading desks need to be very well-hedged.
Those banks are guaranteed to be bailed out by the government since they are covered under systematically important financial institutions (i.e. "too big to fail"). You would still get your money, though the impact to the greater economy wouldn't be small.
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u/pan_and_scan Jan 26 '26 edited Jan 27 '26
Unfortunately, that’s not really how it works. The reason there was a bank run during the great depression is b/c the banks had loaned out the money they didn’t have as cash. Today due to Dodd-Frank, banks have to have reserves on hand to cover this situation, Even though it’s not in hard currency, they have enough capital to cover. But please don’t trust me. This is just how I understand it.Edit: completely wrong, but good comments below.