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A bank run happens
when many customers

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fear that a bank will become
insolvent and withdraw

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their money simultaneously.

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As people withdraw cash, the
bank uses up their reserves

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and cannot cover withdrawals.

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A bank run is typically
driven by fear, rather than

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actual insolvency.

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And if multiple banks endure
runs at the same time,

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it can become what's
known as a bank panic.

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In fact, most banks
don't keep too much cash

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on hand in their
branches, as institutions

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have a limit on how much they
can store in their vaults.

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These limits are for security
reasons and based on need.

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The money that banks have on the
books is typically loaned out

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or is invested.

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Since banks keep a
fraction of deposits,

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they must increase
their cash on hand

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to meet the withdrawal
demands of their customers.

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And if a bank doesn't
have enough cash,

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the bank will need to raise it.

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The Federal Deposit Insurance
Corporation, or the FDIC,

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was established in 1933
in response to a bank run.

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This agency insures bank
deposits for stability.

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But in some cases, banks need to
take a more proactive approach

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if faced with the
threat of a bank run.

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One way is to sell
off assets, sometimes

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at lower prices if they
need to be sold quickly.

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But big losses on asset
sales can cause a bank

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to become insolvent.

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