A demonstrably solvent bank can rarely have a genuine liquidity crisis because it can borrow against its assets from investors, the interbank lending market, or the Fed's discount window; the 2008 crisis is described as an interbank lending breakdown driven by distrust of mortgage-related asset values.

causalpending

Speaker

Arnold Kling

Evidence Quote

if a bank is sort of demonstrably solvent it is very hard for it to actually have a liquidity crisis in my opinion because it can go out and borrow money from investors

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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