How is withdrawing your cash before everyone else withdraws their cash irrational? It's the Nash equilibrium.
The fact that VCs settled on the suboptimal Nash equilibrium actually reflects poorly on them as a community.
People often equate finance to gambling, because even the terminologies overlap: you don't make "risky investments", you "place bets". But that's too simplistic a take, because there are two MAJOR differences between finance and gambling.
1: In finance you gamble with other peoples' money. Not your own. And when your bets go the wrong way, you ruin lives of thousands of families. Not just your own.
2: If you manage to find a loophole and turn the letter of a contract against the spirit of the contract, in finance that's a cause for celebration and a big bonus. ("Well played.") In gambling, that's called a breach of regulations.
Both are amoral, highly utilitarian ecosystems.
The analogy is, it doesn't matter, those who didn't leave quickly got stampeded and died. Anyone who had huge amounts of cash in excess of the FDIC limit sitting there is an idiot. Doubly so if they heard of the "run" and did nothing.
As long as Fed has rates way way above 0% checking accounts, the gravity is going to pull deposits out of banks and into US Treasuries.
I've been withdrawing personal and business account cash for months and rolling in short term treasuries, many others are too as commercial bank deposits have been declining at record pace this year. Now this bank run. Anyone over the FDIC limit + those who begin to notice the interest rate differential (so..safety plus excess returns) are going to be incentivized to pull money out. This might not be the last bank failure... even if technically there is not danger on paper, human psychology will probably dictate that more will withdraw.
The rational choice is clear in this situation: anyone with excess deposits should move quickly. Who cares if nothing else breaks? Better to do it and not need to, than to need to but not do it.
A bank run is a self fulfilling prophecy driven by irrational fear. It is, by definition, irrational. It also doesn’t happen much any more because most banks aren’t susceptible to them (ie. have 90%+ deposits uninsured).
You are just plain wrong that withdrawing was the wrong choice. What about those needing to make payroll or pay other expenses in the mean time? When will they get their money back? You have no idea lol
The bank failed. It has been closed. It was a bank failure. Here's the official source that calls it a "failed bank" [0]
[0] https://www.fdic.gov/resources/resolutions/bank-failures/fai...