How can a bank go bankrupt?

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  • Elle
    Lv 6
    9 years ago
    Favorite Answer

    If too many people banking with the bank go into debt and don't pay back their debt the bank will run out of money.

    People who rack up debt keep taking money out of the bank they don't have. Essentially, the banks money is getting spent on their big screen tvs and expensive cars. Meanwhile, their basic minimum wage job is paying them hardly anything, so they just keep taking money out despite the fact they can't even begin to pay it back. If enough people do this, and no one puts money back and everyone just keeps taking the money, the bank will have no more money left to essentially "lend out" and it'll go bankrupt. This is why banks have debt collectors and debt policies which stop stupid people who don't have brains from racking up endless debt and collect the debt they have, so that won't happen. It's not that they lose all their money, it's just they lose all the money that doesn't belong to people who have accounts there. It's just the money they need to run their whole huge banking operations that they don't have, and so they can't keep the banking running safely or efficiently enough and they have to close.

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  • 9 years ago

    go look up the great depression. A bank doesnt actually keep your money in a vault they invest it use it to make loans to others etc. If those investments and loans dont work out well a bank can get into trouble. Or if everyone shows up on the same day to take out all their money, a bank wouldn't have nearly that much cash on hand to give out.

    However if youre bank went under you wouldn't lose youre money as the federal government and insurance would cough up the cash eventually. I think your insured for up to 100,000 dollars of saving.

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