Banking 101: What You Need to Know, and What Causes Bank Runs

Basic banking explained: It’s all about trust

Stephen Foerster
10 min readMar 20

Depositors in front of the closed American Union Bank, New York City, April 26, 1932. Source: The National Archives

In the Christmas classic, It’s a Wonderful Life, George Bailey, played by Jimmy Stewart, is about to embark on his honeymoon when he notices a run on his bank, Bailey Brothers Building and Loan. He rushes to the bank where he is greeted by a mob of customers, frantically looking to…

Stephen Foerster

I’m a Finance prof, CFA, and author of In Pursuit of the Perfect Portfolio (with Andrew Lo). I write stories about investing. (I don’t give financial advice.)