I understand why banks cannot pay people back in the moment, but wouldn’t they still owe their depositors their money when they eventually DO get the money back presumably once the recession is over?
This is all assuming the bank does not permanently go bankrupt of course. I understand that some banks may just never recover and close their doors for good.
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The bank literally does not have the money – that’s the problem.
If everyone tries to take their money back at the same time, the bank is absolutely fucked, because they don’t have the money.
“[Fractional Reserve Banking](https://www.investopedia.com/terms/f/fractionalreservebanking.asp)” is the main culprit here.
Basically, when you put $10 in your bank account, the bank now has $100 to give out to people.
They give out more money than they have – with the idea being that as long as people don’t all try to get their money back at once, they can keep robbing peter to pay paul, and make fat bank off the interest/fees.
When that stops happening, and people all try to take their money out at once – you get a bank run, the bank literally can’t give you your money because they don’t have it.
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