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Bank panic

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Bank Panic

Bank panic is a term used to describe a situation in which a large number of people withdraw their deposits from a bank due to fear of insolvency or other financial difficulties. This can lead to a liquidity crisis, where the bank is unable to meet its obligations and is forced to close its doors. Bank panics can have a devastating effect on the economy, as they can lead to a loss of confidence in the banking system and a decrease in the availability of credit.

History of Bank Panic

The term “bank panic” was first used in the United States in the late 19th century, when a series of financial crises caused by over-speculation and mismanagement of banks led to a wave of bank failures. The most famous of these was the Panic of 1907, which was triggered by a failed attempt to corner the market in copper. This led to a run on the banks, with depositors withdrawing their funds in fear of insolvency. The panic was eventually contained by the intervention of J.P. Morgan, who organized a consortium of banks to provide liquidity to the system.

Since then, bank panics have been a recurring phenomenon in the United States, with the most recent being the Savings and Loan Crisis of the 1980s and 1990s. This crisis was caused by a combination of deregulation, mismanagement, and fraud, and led to the failure of hundreds of savings and loan institutions.

Comparison Table

Year Number of Bank Failures
1907 500
1980s-1990s 1,600

Summary

Bank panic is a term used to describe a situation in which a large number of people withdraw their deposits from a bank due to fear of insolvency or other financial difficulties. This can lead to a liquidity crisis, where the bank is unable to meet its obligations and is forced to close its doors. Bank panics have been a recurring phenomenon in the United States, with the most recent being the Savings and Loan Crisis of the 1980s and 1990s. For more information about this term, you can visit websites such as Investopedia, The Balance, and Bankrate.

See Also

  • Liquidity Crisis
  • Savings and Loan Crisis
  • Financial Crisis
  • Deposit Insurance
  • Run on the Bank
  • Bank Run
  • Bank Failure
  • Credit Crunch
  • Financial Contagion
  • Systemic Risk

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