Why Banks are so Fragile?

It should be no surprise to people why so many banks are failing. When banks have large loan defaults- the reason banks need cash from the government is because they practice- “fractional reserve banking.” This system of banking is well over 200 years old and is universally used around the world at almost all banks.

Fractional reserve banking is where only a portion of deposits remain with the bank, the majority of deposits are loaned out- this is how banks make money. Therefore, if a large part of their operating capital is wiped out- (actually representing a small portion of their overall assets and deposits) the banks cannot function- they are out of cash !! The majority of their cash has been loaned out right ? So why is the media making it sound so incredible and earth shattering that even a small economic crisis can wipe out banks ? Tthe general media is doing a poor job not to explain to the public why these titanic banks are being knocked over so quickly and easily- from the day of announcing a large swathe of bad loans- the bank is bankrupt within a few days. Of course, using fractional reserve banking DEPENDS on the bank having not even a small crisis- either of confidence, operating cash, whatever- a small problem can, overnight, wipe out the small amount of cash that the bank works with.

So, stop the incredulity already.