> That would only be impossible if the depositors had so much money invested in the banks that there wasn't enough to cover them. Was that the case?
Well, you're probably right in that I think there would have been enough money between the banks' assets and the amount the government contributed to cover the amount immediately owed. Probably. I'm just guessing really, but let's say that's true.
What would the next day have looked like? My guess is that the banks who weren't already failing probably would start to fail very quickly. My guess is that if you let the "bad" banks actually fail and cease operations, with the federal government giving out hundreds of billions of dollars in deposit guarantees directly to the people, you'd have had lines at the banks the next day as everyone else rushed to get their money out of the banks that hadn't failed yet.
I don't think they would, though. I think people would see that their money is in fact safe, as the government guaranteed it, because now the possibilities are 1) the bank will fail and the government covers the deposits and liquidates the bank, and 2) the bank doesn't fail and the deposits are safe anyway.
Well, you're probably right in that I think there would have been enough money between the banks' assets and the amount the government contributed to cover the amount immediately owed. Probably. I'm just guessing really, but let's say that's true.
What would the next day have looked like? My guess is that the banks who weren't already failing probably would start to fail very quickly. My guess is that if you let the "bad" banks actually fail and cease operations, with the federal government giving out hundreds of billions of dollars in deposit guarantees directly to the people, you'd have had lines at the banks the next day as everyone else rushed to get their money out of the banks that hadn't failed yet.