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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It’s dry and disorganized but has been best meditation on the purpose and operations of deposit-taking institutions and the parallels to shadow banking which I’ve ever read. (Thesis of book is basically 2007 was a banking crisis on the repo market rather than usual diagnosis.)
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