With banks it also has a knock on effect as witnessed in previous depressions where one bank fail leads to another and another and everyone wants to withdraw their money.
The alarm bells should have been sounding when they said they would pay by dc or cheque because TCs are supposed to be for getting cash otherwise what is the point of them. They are supposed to be honoured as if they are cash. Maybe try Amex to see if they will honour them they have a proud...