[nhaehnle]

I think you're right about our mostly-agreement :)

Just to clarify, I think we have to distinguish between the likeliness of a bank run and the effects of a bank run.

Indeed, the FDIC makes a bank run extremely unlikely. Perhaps this is what you mean by "protecting the bank".

However, even if there were no FDIC, a bank run on a good (solvent) bank would not cause that bank to collapse, due to the central bank's lender of last resort function.

The bank run would "merely" cause a shrinking of the bank's balance sheet, which the bank would have to offset by selling its assets over time.

It is true that a big change in the balance sheet like that could still lead to the eventual death of the bank, e.g. because the bank has high fixed costs (in the form of physical branches, non-fireable employees, and so on) which can no longer be covered by profits from its regular business. However, this eventual death is (a) not certain since the bank has plenty of opportunity to turn things around and (b) a slow death, very much unlike the sudden implosions that people usually think of when they hear "bank run".

[mathattack]

Once a run happens, the central bank has to make a choice on who to lend to based on imperfect information, though. The central bank might say, "I don't know about all these local real estate loans, let's let them fail."

It's the FDIC that removes this possibility.

Thanks for engaging in this conversation!