To understand that Wall Street crash a decade back, think of “It’s a Wonderful Life,” and the scene in the bank. Simply put, that’s what the Wall Street crash was, a bank run. It was also no more and no less than a bank run, even if we might want to color in a few of the details.
We have a system called fractional reserve banking. What this really means is, as Jimmy Stewart explains, that our deposits aren’t in the vaults of the bank, our savings and checking accounts are in the mortgage of the house down the road. If we all arrive demanding our money back at the same time then we can’t have it — it’s out there, not in the basement where they can go get it. It was wholesale depositors, not retail bank customers, who all arrived to get their money back from the Wall Street banks — which they couldn’t have, of course.
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