Banks are susceptible to many forms of risk which have triggered occasional systemic crises. These include liquidity risk (where many depositors may request withdrawals beyond available funds), credit risk (the chance that those who owe money to the bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans).
Banking crises have developed many times throughout history, when one or more risks have materialized for a banking sector as a whole. Prominent examples include the bank run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the subprime mortgage crisis in the 2000s. Usually, the governments bail out the bank through rescue plan or individual public intervention.
I wrote about the huge sovereign debt the United States is blessed with. These are people who are supposed to be economists and the experts who know the root of the problem and how to deal with it. Well, during the crisis in the financial system in 2008, no one had any idea what to do with the system! None whatsoever! Not the legislative bodies, not the bankers and certainly not the speculators! It's one reason why Icelanders couldn't get money out of their ATMs for 3 days! … more