Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Why There Should Be Runs on Banks

As a bank, Bear Stearns wasn't worthy of the name. At the end, its balance sheet was so stuffed with junk, there was no way it could survive as an independent entity.

In Congressional testimony, top executives of that institution were "shocked, shocked, shocked" that investors would do that to them. But investors had a fiduciary duty to look after their own safety and soundness. And the mortgage assets backing up Bear's balance sheet were no longer safe and sound, having come apart during the mortgage crisis. If any thing, the institutions waited too long (until basically the last possible moment), rather than fleeing at the first sign of trouble, in the fall of 2007.

After all, what can you expect from an institution whose chairman STILL smokes pot, and leaves the offices at critical times to play bridge. (Bernie Ebbers of Worldcom was also a hippie "flower child" who "went fishing," both literally and figuratively, at critical times.) Such a bank is better of not existing and performing the role of a banking institution. That's why runs on banks are necessary, to "kill" such banks.

"Small" depositors are insured up to $250,000. That means that MANY people will NOT get wiped out. Larger depositors need to look out for themselves. But they mosly have the wherewithal to do so.