[JumpCrisscross]

> until Central Banks intervene and solve the problem altogether, which makes the problem functionally disappear, but it's still the key problem

The Fed and FDIC are separate. Central banks help with the liquidity problem. Deposit insurance solves it.

It remains a core risk. But risks have to be managed. Problems are unsolved.

[littlestymaar]

> The Fed and FDIC are separate. Central banks help with the liquidity problem. Deposit insurance solves it.

It seems you are somehow conflating “liquidity issues” with “what happens with customer's bank account”, as if bank runs were the only kind of liquidity issue that could happen to a bank, and then arguing that this isn't the case. But that's not my point in the first place!

Commercial banks need to borrow (central bank) money every once in a while to meet their liquidity needs, there doesn't need to be a bank run for that to happen, and if at that time nobody wants to lend, they are dead. Fortunately they can get the liquidity they need from the central bank directly at the discount rate, and we don't have a financial crisis every other year like what happened just before the Fed was created.

[JumpCrisscross]

> there doesn't need to be a bank run for that to happen, and if at that time nobody wants to lend, they are dead

Yes. This is what we have been discussing. This is solved.

What you describe happened a year ago. If the bank isn’t insolvent—if it’s just a liquidity issue—that is a solved problem with deposit insurance in America. We fold it, put it into receivership, everyone keeps banking, next day is stressful for accountants. Even without the central bank’s involvement.