The discipline of behavioral economics and the related fields of behavioral finance and neuroeconomics specialize in exploring the biases and irrationality that can lead to the “madness of crowds” in financial markets. One thing that hasn’t changed during the past 100 years is the abject terror that can be induced at the prospect of losing all of one’s savings or the cash to keep a business afloat. In a recent statement, House Financial Services Committee chairman Patrick McHenry characterized what was happening as “ the first Twitter-fueled bank run.”
Depositors could sit at home and obsessively refresh their browsers for hours on end to try to complete an online transfer of their cash to another institution. Private Slack channels filled with frenzied messages from those pulling out their money.
Every available electronic channel-Slack, Twitter, online banking-was brought to bear, all without the necessity of showing up at 3003 Tasman Drive in Santa Clara, Calif., the bank’s main office. But the inventiveness of Silicon Valley in the decades since that earlier economic shock have offered alternate pathways for depositors to show up en masse for a bank run. Following tradition, people did appear at the bank’s doors. Archival photographs will be dusted off to display the restive crowds gathering outside bank doors in desperate attempts to collect their life savings.Ī kind of dress rehearsal for the coming commemorations took place in recent days as the financially besieged Silicon Valley Bank (SVB) collapsed. In just a few years, news specials and academic papers will mark 100 years since the start of the Great Depression.
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