No modern bank has funds to cover its deposits. It is the nature of fractional reserve banking to hold several times less cash than there are deposits.
All banks will close if there is a run on them. The reason it happened to Indymac was because people lost confidence in their lending practices and a run happened.
But it could happen to any bank at any time, as soon as people decide they don't trust the bank to hold their money any longer.
And if it happens enough, we have economic devastation.
|