Sandbox S/Ls do not do term loans

Warren Mosler and the Great American Banking Myth

The promised argument "against free banking" consisted of little more than the tired old assertion that, without comprehensive deposit insurance, banks, no matter how sound, are bound to fall victim to runs:

What happens is, you know, somebody starts a rumor in social media that they saw the bank president's wife taking money out of the bank, so all of a sudden there's a panic, everybody tries to take their money out, and the bank fails… And the market in all its wisdom has decided that bank needs to fail. It's always for some reason that's highly suspect… Even the banks that failed in '08 and were liquidated, on a look back, they were not insolvent. It was just liquidity issues…

Which is to say, my version of sandbox has not yet included insured term accounts. They will come, and they have extra risk.

 But a standard sandbox automated S/L fails before the runs occur. The reason is that the pit bos has a look at the partial run, and runs up the interest charges on loans making the next step in the run be split between deposits and loans. Run risk is shifted, both groups exit and a loss equal to current marking making risk is carried by the pit boss.  Generally that means the ad revenue from the S/L site is lost; a search engine model.

I have not worked out the term loans, an insurance product. I might get around to looking at that, but would rather the fintechers work that themselves.