The New Age of Bank Runs
Blame the smartphones and social media
Originally published via the Politics Through History newsletter (subscribe!).
In 1819, America suffered its first bank run. The FDIC did not exist and bank tellers were literally counting out cash before it was gone. The new age of bank runs is far different.
What previously took days, weeks, and months to play out in 1819 now takes hours or even minutes. All someone with a large Twitter following has to do is tweet that everyone should remove their money from Bank X and it’s off to the races. Close-knit industries like those in Silicon Valley and Manhattan real estate all communicate frequently on their smartphones. Information travels in seconds.
This new age dynamic contributed to the fast downfall of Silicon Valley Bank and Signature Bank before the federal government acted to calm the waters. Federal regulators like Jerome Powell’s Federal Reserve and Janet Yellen’s Treasury Department were caught unprepared. They clearly did not have risk models that accounted for smartphone and social media activity.
As someone who has worked on Wall Street trading floors, I can tell you that these regulators prioritize supervisory consistency. They want similarly situated financial institutions to receive similar scrutiny. It makes sense in…
