Good News & Bad News, page-25688

My 2 cents on the current bank crisis. I don't have a finance degree.

The banks use depositors' money to buy bond (and therefore can pay interest to depositors with the bond interest). It's generally a low risk investment. Bond can be traded but you don't have to. At the end of the bond term (maturity) you got the original money back. However, if many depositors come to withdraw money at the same time (bank run) and if the bank doesn't have the cash (liquid), it needs to sell the bond to pay depositors. This is where the bank may lose money as the bond value is generally down when interest rate up. I wouldn't say it's the bank fault entirely as this is their normal practice. There must be a distrust, worry that makes the bank run. Without a bank run, there is less likely any trouble. May be all depositors should pay bank a fee to keep their money in a safe place that they can access at once any time.