Thinking about bank runs. Prior to federal deposit insurance, why couldn't banks protect themselves from runs with explicit policies? Like, “if our deposits drop by more than X% in Y timeframe, we will automatically halt withdrawals.” Did any banks ever try this?
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Suspend convertibility = “At start of business on Monday, we no longer accept withdrawals to currency. We will issue you a certificate entitling you to payback from any member of the consortium at some indefinite point in future; if you need cash, sell it at a discount to anyone”
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Fascinating. Did it work? Why did we need FDIC eventually anyway?
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FDIC insurance works a lot better, since the US had systemic banking crises every 12-20 years. Where’s my kindle; it’s a great book.
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