Is it true that banks wont have enough cash if everyone wanted their money at once?

Question

If everyone cashed out their bank accounts, is it true that banks would have to close because they would run out of actual cash?

Answer 1

Yes, that is true.

They take the money you deposit and loan it out to generate a return. It's not sitting in a pile in a vault somewhere.

Answer 2

Not only would the banks run out of cash but the Treasury would run out of cash too, and they would have to print more. Let's say that everyone's bank accounts are worth $1 million at one single bank. The banks don't keep $1 million in their vaults--- takes up too much space, and you have to pay for that space and the people and equipment to protect it, and it is too hard to keep track of (to make sure no one is stealing). On top of that, say there are 100 banks (there's way more--- just picking a number). The Treasury does not print 100 million worth of bills. Same problems as before, plus why waste the paper and the expense to print it if no one is going to use it.

If it ever got to the point where everyone wanted all of their money in cash, banks would definitely close, and it would take a few weeks to get the new supply of cash printed and distributed, and get everything back to normal.

Answer 3

Why Is FDIC Insurance Important to You?
All FDIC-insured banks must meet high standards for financial strength and stability. The FDIC, with other federal and state regulatory agencies, regularly reviews the operations of all insured banks to ensure these standards are met. Despite these safeguards, some insured banks fail. If your insured bank fails, FDIC insurance will cover your deposit accounts, dollar for dollar, including principal and any accrued interest, up to the insurance limit.

Historically, insured funds are available to depositors within just a few days after the closing of an insured bank. Since the start of the FDIC in 1933, no depositor has ever lost a penny of insured deposits.

As far as just showing up and demanding your money, they probably wouldn't have enough. BUT within a few days, you should be able to get every penny they owe you that you had in your account, up to 100k.