A middle-aged man in a hurry happened to pass by the entrance of United Bank. He suddenly stopped and looked at the sign of United Bank and asked doubtfully, "Is your bank bankrupt?"

"Looking at what you said, of course our bank is in normal business." The bank employee standing at the door was unhappy. Although the business is usually very bad because of the low interest rates of Union Bank, it is still far from bankruptcy.

The man was surprised by the deserted entrance of United Bank and asked, "Really, what kind of business does your bank do?"

"You can deposit money, you can withdraw money, that's all for now." The bank employee replied seriously.

The man looked at another bank not far away. He had just withdrawn money from that bank. There was still a long queue at the door of the bank. However, the door of the United Bank looked very normal, just like normal business. Comparing the two

, United Bank suddenly felt a special sense of security, and said directly, "I want to save money!"

The interest rate is no longer important at this time. Being able to successfully deposit and withdraw money is much more important than the interest rate.

What do banks fear most? Is a run. This place, which theoretically holds countless cash, is afraid of depositors coming to withdraw money. Groups of depositors either withdraw their money or transfer large amounts of funds to other safer institutions.

.At the same time, not only depositors will withdraw their money, but borrowers will also know that the bank may not be able to renew the loan after paying off the loan, and choose to default.

For the largest financial institutions, the liquidity crisis - especially the lack of available funds, higher financing costs and the rise of non-performing loans that reduce cash flow - can also be fatal.

The first run occurred in the Roman Empire, the new Rome of the United States. It is not surprising that this happened. When money market investors learned that there was a problem with the bank's loan portfolio, the hot money suddenly left, and the bank was forced to report to the government

Institutional borrowing survives.

In theory, this is the best way for banks to survive the crisis. However, there is no central bank in the United States. The First Bank and the Second Bank both existed for twenty years and closed due to heavy opposition. Therefore, this kind of bank is generally found in other countries.

There are options for escape that cannot be accomplished in the United States alone.

Two attempts to establish a central bank in history suffered setbacks: there has been no attempt to establish a central bank since. Because any bank reform plan that involves the establishment of a central bank will always encounter opposition from the citizens of the United States and end in failure.

Successive treasury ministers of the United States have continuously expanded the authority of the treasury department and intervened in the currency market through indirect regulation by releasing or withdrawing the treasury's surplus currency. Since the federal treasury itself is not the central bank, it does not have the power to issue currency, nor can it mobilize the reserves of private banks.

The indirect control methods adopted by financial institutions are often insufficient to deal with sudden financial crises. In fact, it only has a certain function of preventing financial crises, but does not have an anti-crisis function.

The Chicago Daily Times seemed to understand that its unintentional mistake had caused panic among Chicago citizens. As a newspaper with an attitude, editor-in-chief Ebert immediately began to remedy the situation and sent out senior manure diggers to stabilize the mood.

The next day's newspapers used Sheffield United Bank's calm demeanor, saying there was nothing to panic about.

To this end, we also interviewed the managers of Union Bank of Chicago and conducted a special report, asking the bank managers to share their views on this unwarranted panic and Union Bank's response plan.

"Our capital reserves at United Bank are unparalleled. As for a way to deal with it? The interest rate has been half that of other banks for a long time, attracting high-quality customers. If there is really a way to deal with it, we received a call from the headquarters and the interest rate was reduced to 100%.

Two, it's one percentage point lower than before." The manager of Union Bank of Chicago said eloquently.

"Maintaining market liquidity through interest rate cuts, and because our United Bank's capital reserves are extremely strong, if all banks can adopt interest rate cut policies, the liquidity of cash in the market will increase."

Why doesn't Union Bank dare to cut interest rates? There isn't much money in the bank. It's all supported by slave owners. It doesn't have much money, but it also doesn't have many depositors. Such a bank backed by Union Company is completely standing up and talking.

Without back pain, I am already in such a miserable condition, why am I still afraid of an interest rate cut?

Other banks are in a different situation. These banks have many depositors, which is much better than United Bank. The sad part is that there are so many depositors, but there is not much cash in these banks to resist depositors' cash outs.

.

After this day's report, a long queue also appeared at the door of United Bank, but these people came to deposit money. If it is a hundred years from now, once the United States cuts interest rates, it means that it will soon start to release water to increase liquidity.

Now, without the Federal Reserve, we are seeing bank runs spreading out of New York and across the country. Union Bank's announcement of an interest rate cut cannot increase the liquidity of the market at all, because Union Bank has no money at all.

You only dare to do this if you have no money and no pressure to run. At the headquarters of Union Bank in New York, Blair announced that all Union Bank banks across the country would cut interest rates to 2%, and also called on other banks to follow suit, which would increase market liquidity.

Sheffield is of course the person who knows the best about Union Bank’s reality. All Union Bank’s money is his own. Excluding this part, the total deposits of depositors across the country are less than 10 million. He doesn’t even know that this is less than 10 million.

How much cash belongs to employees in various industries of the United Company?

Union Bank's largest customer was the owner of Union Company, the slave owner himself. He was not afraid of runs if he had money. This was the main reason why Blair became a public enemy at this time.

The funds in the hands of other banks and the funds in their accounts cannot have the same ratio as United Bank. United Bank has almost 100%, minus its largest customer Sheffield. It is just a bank that can deposit and withdraw money. While other banks have 100%.

The ratio of 25% is already considered very high, and many are only 5%.

This ratio will inevitably go bankrupt in the face of a run, because there is no money in the bank, only many depositors. The difference now is that Union Bank has no depositors and no cash but slave owners, while other banks have depositors but no cash.

"An interest rate cut? How did the Union Bank of Chicago come up with such an operation? It seems that it was done by Blair." Sheffield put out the cigar that had been smoked to the end and said very satisfied with his frugal behavior, "But now financial institutions

In a situation where banks and trust companies are full of triangular loans, it is indeed a breath of fresh air.”

"Why does your bank dare to do this? Doesn't proposing a rate cut make the other banks enemies when their debts are so serious?" Edith Rockefeller didn't understand why Union Bank proposed such a thing.

"If our country had a central bank, interest rate cuts would definitely be useful. But our country doesn't have one!" Sheffield raised his eyebrows and gloated. "Blair is right to claim that cutting interest rates can avoid the crisis, or at least delay it, but the Union Bank is not a central bank.

Banks, other banks and financial institutions have huge liabilities and dare not cut interest rates because these banks have no money in their accounts and only have huge depositors. They are afraid of a run and it is too late, so how can they cut interest rates?"

"Everyone hopes that the run will be over soon, but your bank is going to cut interest rates. It is simply driving them to death!" Edith Rockefeller was shocked after hearing what Sheffield said. This is simply crazy. Her man obviously hopes

The run spread across the country, causing all the banks in question to fail.

"Dear, you can't say that. If the cash flow of other banks is healthy, lowering interest rates together is definitely the fastest way to quell the run. Now that most banks are opposed, it only shows that the run they are facing now is serious.

It makes sense. Even if it hadn't been because of the Knickerbocker Trust incident this time, if it had been delayed for a year or two, the problem would have only become more serious." Sheffield denied that Edith Rockefeller had framed him.

How could the slave owners hope that all domestic banks would collapse? Even if they really wished, they couldn't admit it.

Using historical materialism to explain the relationship between accidental and inevitable, there is only one central point. The difficulties faced by many other banks now are entirely their own problems. Even if they escape this time, if they do not correct the problem, they will definitely

We will repeat the same mistakes again, and the biggest lesson history teaches people is that people never learn from people and lessons.

As for Blair's decision to let Union Bank steal the Fed's game, Sheffield agreed with both hands. Anyway, that's the situation at Union Bank, and the fire will never burn on him. It's not allowed for the market to decide who is most qualified to survive.

Is it the competition that the United States has always advocated? Why can’t it be the case when it comes to the bankers themselves?

The role of interest rate cuts is to allow investment expansion to make up for the lack of growth momentum caused by sluggish consumption, enhance market expectations, and curb the shrinkage of economic activities due to lack of confidence. But the problem now is that most banks are facing a run wave, and interest rate cuts are of great benefit to

Today's banks, trust companies and financial institutions are just looking forward to their collapse.

The run quickly spread to other trust institutions and began to spread to commercial banks. Even mainland banks and depositors have begun to withdraw deposits from New York. The supply of cash in the New York money market has been tight, and the stock market is bleak. Pessimism is spreading, and Wall Street is

There were crowds of people trying to withdraw money. Even outside the banks with the best reputations, anxious depositors lined up in long queues.
Chapter completed!