Patrick McKenzie (@patio11) revisits his March 2023 essay that explained the dynamics of bank runs and system stress during the banking crisis one month prior. With data from a newly released Federal Reserve paper, he analyzes the true scope of the banking stress - including revelations that 22 banks experienced severe deposit outflows, far more than publicly known at the time. While officials blamed social media for bank runs, data shows institutional players, not retail depositors, drove the events. – Full transcript available here: www.complexsystemspodcast.com/banking-crisis-two-years-later/ – Sponsors: Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast – Links: Bits About Money: https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/ Federal Reserve Report: Tracing Bank Runs in Real Time https://www.newyorkfed.org/research/staff_reports/sr1104.html Byrne Hobart’s blog The Diff: https://www.thediff.co/ Matt Levine’s blog Money Stuff: https://www.bloomberg.com/account/newsletters/money-stuff – Twitter: @patio11 – Timestamps: (00:00) Revisiting the March 2023 essay (01:47) The Fed's study (11:21) Why are banks failing? (14:41) A useful heuristic from bond math (18:05) Sponsors: Vanta | Check (21:00) Maturity transformation (29:54) Sponsor: GiveWell (30:42) Liquidity problems are the proximate cause of bank failures (33:43) Trying to forestall a banking crisis (40:16) Deposit insurance expansion (47:12) Deposit insurance has some legacy issues (52:04) What would happen if my bank were to go into receivership this weekend? (59:46) What should users of the banking system do? (01:04:09) Parting thoughts (01:05:08) Footnote
