I don't know how old you are, but I'm old enough to remember going to a bank teller and getting cash from a window back in the day before computers.
I don't know how old you are, but it might be time to stop thinking like it's the 1960's.
If you think a bank can work by having everyone line up at their local friendly teller and have individual withdrawal/ deposit slips written and cash exchanged…….At this point I am not sure if you are trolling or legitimately uniformed. Maybe the banks where you live are from the stone age.
Here is a story for you. Assume DotiniBank.
T+1 after electricity ends. Outside DotiniBank, 500 people line up to transact. Dotini (stand in bank teller) records all these individual transactions in a big ledger which all 50,000 DotiniBank client positions in it. As people don’t have proper ID all the time and the ledger is large, only 100 people get to transact on day 1 – people are upset.
Dotini then spends the night updating his ledger properly – he needs to make sure he has enough funding now as the last 10 people all wanted to withdraw their money because they were angry at the slow service. Dotini finds out he is doesn’t have enough funding available if the next 50 people in line in the morning all want to withdraw all their money. He writes a letter to the Fed asking for a new funding line.
The next day Dotini opens his window and the line is now 5,000 people long as rumour has spread DotiniBank isn’t given access to people’s money (because it is so slow to transact). The first person in the queue is a whale and his withdrawal will fully exhaust all Dotini’s available funding. Dotini is worried, so he checks the mailbox – but the Fed hasn’t written back. Damn.
DotiniBank has now run out of money and Dotini has no other option than to put up a “back in 5 mins” sign so he can drive to his local Fed agency office and talk to them. When he gets there they tell him they haven’t received his letter, and anyway, he needs to fill in a bunch of forms to declare DotiniBank’s fully funded asset position, so they can work out if they can offer a repurchase agreement to provide some short term funding. Dotini now drives back to DotiniBank, closes early for the day to do this paperwork – but finds the queue is rioting because their want their money.
2 days later, Dotini has drawn up his fully funded balance sheet for the Fed – it was a tough job reconciling every loan and deposit manually. As he is about to drive back to the Fed office, he is stopped by a lawyer from JPMuggin Bank. JP Muggin had a big funding line provided to DotiniBank, and now they want it back as they have seen the riots in the local newspaper. This is a problem as Dotini will need to redo his entire funding position for the Fed. The rioters are now breaking windows of DotiniBank and news crews are around.
Dotini is confident this can be resolved with his pen and paper though, and drives back to the Fed anyway to ask for help. He gets in line, as there are reps from 8 other local banks all waiting to speak to the Fed.
