1. Introduction: The Paradox of PanicIn September 2008, customers lined up outside Washington Mutual branches, desperate to withdraw their savings. Rumors of the bank’s insolvency spread rapidly, fueled by news headlines and nervous chatter. By the end of the month, the bank collapsed—the most significant failure in U.S. banking history. Yet, paradoxically, much of the panic was driven not by actual insolvency at first but by the expectation of it. This phenomenon isn’t new. During the Great ...

1. Introduction: The Paradox of PanicIn September 2008, customers lined up outside Washington Mutual branches, desperate to withdraw their savings. Rumors of the bank’s insolvency spread rapidly, fueled by news headlines and nervous chatter. By the end of the month, the bank collapsed—the most significant failure in U.S. banking history. Yet, paradoxically, much of the panic was driven not by actual insolvency at first but by the expectation of it. This phenomenon isn’t new. During the Great ...