USA HISTORY

Detailed explanation-1: -The term “bank run” refers to a circumstance in which banks run out of funds due to depositors withdrawing all of their money for fear of losing it.

Detailed explanation-2: -Thousands of banks failed during the Depression and loss of confidence caused anxious depositors to create “runs” on banks as they tried to withdraw their money before the banks collapsed.

Detailed explanation-3: -A bank run occurs due to customer panic rather than actual insolvency on the part of the bank. A bank run that emanates from public fear and that pushes a bank into actual bankruptcy is an example of a self-fulfilling prophecy.

Detailed explanation-4: -Historically, physical banks would shut down a few days if their cash reserves were running low. Today, banks might limit the amount of money people can normally withdraw in a day. Banks often serve as lenders but can also be borrowers if they find their cash reserves are running low.

Detailed explanation-5: -The most recent global bank run occurred during the financial crisis of 2007-2008. Bank closures were relatively uncommon in the four years leading up to the 2007 financial crisis with only three U.S. bank failures in that time. However, that began to change after the onset of the financial crisis.