# Bank Run By [Ram](https://paragraph.com/@ram008) · 2023-03-11 --- Coming from a family of bankers, auditors, accountants and governance people, for me, there is that inherent trust in regulation, doing the right thing by customers and handling money responsibly. The bank to me, is as holy as a temple. After all, isn’t Goddess Mahalakshmi, the goddess of wealth residing in her full splendor residing in those banks? The imagery that flashes to mind instantly, are those childhood religious texts that show the Goddess of wealth showering coins from a pot of Gold to the needy. Another image is that of a stacked tower of currency that shows the Goddess in front of, or imprinted on those notes. Such is the serenity of a bank. When the tellers hand you the cash, two things come to mind, one is the fresh scent emanating from the currency and the other is to seek blessings from the Goddess that resides in those notes. So, when I read about the failure of banks, investment firms and mortgage lenders in 2008, it came as a total shock. It was reminiscent of a growing up moment, when “finance companies” offering 24%-28% APR failed in India im the 90s. So many unsuspecting depositors got hoodwinked and to this day are fighting for their funds. It was the first time I got to know that not all banks were sincere, treating money like their own, or acting in the best interests of their customers. In 2008, CDOs or collateralized debt obligations took hoodwinking to a whole new level. It was impossible even for regulators to keep track of the fraud. Each decade seems to bring new ways of fraud. Especially when money is cheap, being printed at will by then fed reserve, people don’t know what to do with the money. Greed is rampant. The crypto boom post COVID saw the emergence of DeFi or decentralized finance. DeFi meant people could bypass the banks, lend to each other, skip KYCs, and access capital via “flash loans” that were granted and paid within a short time. There was no regulation other than the collateral provided (as crypto). If the borrower failed to pay interest or principal, a proportion or 100% of the collateral would be kept by the lender. There was a mediator that validated the authenticity of the borrower and the lender and the transaction in the blockchain. All good, until, hell breaks loose, crypto token values vary wildly and borrowers go amok or disappear. Crypto princes became overnight paupers, conmen, fugitives or prisoners. As the waves recede, the shit comes out. The waves recede here amounting to interest rates going up, capital becoming tight, easy money goes away, installments go higher as teaser rates expire and defaults increase. VCs are the worst example of hypocrites that change stories as they like. In times of easy money, they invest like there is no tomorrow, waive all risks and take advantage of capital. In times of distress, for them that is, when money gets hard, they diss the banks and the feds. They nicely weave away from the very companies they backed, leaving them to their distress. These companies can’t pay up interest on loans, the banks, like Silicon Valley Bank (SVB) that branded themselves as friends of the founders, were counting on these loans getting paid back to honor depositor withdrawals. The longer the default, the bank gets into a hole. A hole that grows fast with time. Depositors lose trust and start withdrawing. Elon and Twitter have ensured that they will not give banks any time to recover as FUD grows rampant. The FDIC is seen as the guarantor of $250k per depositor, never mind the risks that were taken by greedy sharks. Banks like SVB need to go down, VCs need to learn their lesson and FDIC should not bail these guys out. The VCs take all the upside and leave the downside cleanup to the Government and taxpayers. How is that fair? This is a sad state of affairs for Main Street. When the average depositor cannot trust banks, where do they go? Credit unions? How long can those be trusted? Do you go back to stocking bills under the mattress? Is this what decentralized finance really means? Will Bitcoin save anything? Or do we go back to physical metal? Time will tell…. --- *Originally published on [Ram](https://paragraph.com/@ram008/bank-run)*