Topic: Wholesale funding, bank runs and liquidity freezes in the 2007/8 financial crisis

 

The canonical model of banking crises by Diamond and Dybvik focuses on depositor runs which prompt a liquidity crisis.

 

Such runs were largely absent in the 2007- 8 crisis but liquidity freezes played a central role.
Discuss the innovation of wholesale funding.
Discuss how traditional bank runs and compare it to the one that was witnessed during the 2008 banking crisis.