Running To Empty

Running To Empty
April, 2023

We recently took a month’s long trip to Florida and, upon returning home, we found ourselves grappling for something to write about. We could write about relaxing on the beach, but no one wants to read an account of someone else sitting in the warm sand with an ocean in front of them.

So, here’s something different.

For the past several weeks, we…really just Bob… has been mesmerized by a couple of items in the news. First there is the bank run and subsequent sudden failure of Silicon Valley Bank (SVB). This bank run made him recall the scene from one of our favorite movies, “It’s a Wonderful Life”, where the good ole Bailey Bros. Building and Loan, run by George Bailey (played by Jimmy Stewart), is about to go under due to a run on it as the Great Depression deepens in 1932.

Mary Bailey (played by Donna Reed) steps in and saves the day with funds she and George have been saving for their honeymoon. Fresh from their wedding ceremony, they spot the panic growing outside the Bailey building as they drive by. The townsfolk are squeezing in to take their money out. Quick thinking Mary offers up their own modest savings to calm the crowd, so they don’t all demand all their money back at once.

This gives George the opportunity to look the nervous Nellies in the eyes and talk them out of panic. George convinces most to take out just a few dollars and not close their accounts since they don’t need their total balance to pay their bills. He reminds everyone that their deposits were used to loan each other money to build and buy homes. The crowd relents and Mary and George save the day – with two dollars to spare.

Left unsaid is what they did for cash the following day. No doubt Bailey Bros. experienced a romanticized version of a bank run. In the real world, Mary’s honeymoon stash wouldn’t have mollified the maddening crowd. Even today, most well run, financially strong institutions (which SVB was decidedly not one) would have difficulty withstanding a bank run on its own, especially when the panic and withdrawals are rapidly executed online with only a few clicks. If the run brings a bank down, the former customers can simply rationalize “See, the bank is now insolvent. Good thing I got my money out.” Yet, that feeling of relief may not last as bank runs are often contagious, spreading from one institution to the next.

The Telephone Game Goes Live

We credit our youngest child Elle for telling us about a real-life bank run that should be made into a movie. It occurred in Japan in 1973 and perhaps the movie would win an Oscar for best comedy. What follows is directly from Wikipedia, lightly edited for readability.

On the morning of December 8, 1973, three female high school students talked about their jobs after graduating, in a car on the Iida Line, Japanese National Railways. Two of them (B, C) mocked A, who worked at Toyokawa Shinkin Bank, remarking “that is dangerous”. This remark was not a statement about the financial security of Toyokawa Shinkin bank, but rather that an armed robbery might target the bank.

This was intended as a joke, but A took it seriously. That night, A asked a relative of hers, D, “Is Shinkin Bank dangerous?” D assumed that she referred to Toyokawa Shinkin Bank, and asked another relative, E, who lived near by the main branch of Toyokawa Shinkin Bank “Is Toyokawa Shinkin Bank dangerous?”

On December 9, E spoke to F who was the owner of a beauty salon, whether “Toyokawa Shinkin Bank might be in danger (of bankruptcy?)”

On December 10, a cleaning service shop owner H, and his wife I, who happened to be present there heard the rumor when F talked about it to relative G.

On December 11, the rumor was a topic of conversation among housewives in Kozakai. The rumor had taken on an assertive form such as, “Toyokawa Shinkin is in danger” at that moment.

On December 13, J who had borrowed the telephone in H’s shop, ordered the person at the end of the line to withdraw 1.2 million yen from Toyokawa Shinkin Bank. J had not heard the rumor, and just requested the withdrawal in order to make payment. However, I who overheard the ordered withdrawal assumed that Toyokawa Shinkin Bank really was going into bankruptcy. She also withdrew 1.8 million yen. H and I then spread the rumor. Amateur radio operator K also spread it widely. Following this, 59 depositors came into Toyokawa Shinkin Bank and withdrew 50 million yen in total.

According to the testimony of a taxi driver who carried customers to the Kozakai branch of the bank, the rumor gradually worsened.

  • “Toyokawa Shinkin Bank might be in danger.” – A customer who got in the taxi in the afternoon
  • “It is in danger.” – A customer in around 2:30 PM
  • “It will go into bankruptcy.” – – A customer in around 4:30 PM
  • “Its shutter will never be lifted up in tomorrow morning.” – A customer at the night

On December 14, the panic escalated. A statement from Toyokawa Shinkin Bank released to settle the panic was misconstrued:

  • “Odd money under ten thousand yen will be rounded down.”
  • “Their business condition is suspicious after all because they won’t pay interest.” – The bank repaid principal at first in an attempt to speed up the repayment process, as the calculation of interest took a long time.
  • “Police is investigating the bank.” – On seeing police officers who had arrived on the scene to control the crowd.
  • A depositor made an inquiry that “I heard that a briefing session for bankruptcy is taking place.“
  • A depositor who was handed a numbered ticket for crowd control shouted angrily: “Such stuff is meaningless!”

In addition, new rumors arose: “Embezzlement of a banker is the cause of bankruptcy“, “A banker got away with five thousand million yen“, or “The chairman of the Toyokawa Shinkin Bank committed to suicide” and so on.

From the evening of the 14th to the morning of the 15th, some media who were present by request from Toyokawa Shinkin Bank reported that the bank run was caused by a false rumor. The major newspaper headlines read:

  • “5000 People, Manipulated by False Rumor” – Asahi Shimbun
  • “Manipulated by False Rumor, Bank Run on Shinkin Bank” – Yomiuri Shimbun
  • “Run by False Rumor” – Mainichi Shimbun and so on.

The Bank of Japan held a press conference and stated that Toyokawa Shinkin Bank’s business condition was fine. The Bank supplied cash to Toyokawa Shinkin Bank through Bank of Japan Nagoya branch to avoid confusion. The cash was piled up to a height of 1 meter, with a width of 5 meters in front of the vault of the main branch of Toyokawa Shinkin Bank to demonstrate their financial soundness.

On December 15, posters which said that there was no problem at Toyokawa Shinkin Bank under the joint signature of Shinkin Central Bank and National Association of Shinkin Banks were put up in Toyokawa Shinkin Bank’s branches. The chairman of Toyokawa Shinkin Bank who had been rumored to have committed suicide started to persuade his customers at one branch. Depositors started to calm down because of these countermeasures. However, some agitated depositors still came into the bank.

On December 16, police revealed and released the propagation route of the false rumor, with the NHK reporting the police statement that night.

On December 17, major newspapers reported the police statement. However, the false rumor persisted. The rumor died over the following several days.

Should We Outsource Misinformation to Artificial Intelligence?

There are probably many lessons to take away from this story. But who among us hasn’t witnessed unfortunate consequences because of someone misunderstanding or overreacting to what someone else said, rushing to the wrong conclusion, then spreading a false and possibly damaging rumor, which quickly takes on a life of its own? That’s human nature, we guess.

Changing gears – sort of, the other topic fascinating Bob are the numerous reports of artificial intelligence (AI) models spewing out truly crazy/scary “desires” like jealous love, lying and the quest for world domination. For instance, see here, here, and here. We don’t have much more to say about these completely human proclivities other than to answer the question what’s AI got to do with bank runs caused by the rapid spread of panic across social media?

As far as we know, absolutely nothing… at least not yet.

All of this makes a person long for a sandy beach with a good book in hand. If and when we make our way back to one, we will find something worthwhile to write about, come hell or high water.

Cheers,
Bob and Julia 

                             Running on, running on empty,
                             Running on, running blind,
                             Running on, running into the sun,
                             But I’m running behind.
                                            Running on Empty, Jackson Browne

Header photo: George Bailey doing his best to calm the throng.
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