3 ms·

>> your long duration assets drop alot in value so you can't easily liquidate them That conjecture seems wrong. Sure, 2% 30-y treasuries dropped a lot in value

• jcbrand 4y ago
  As a bank, you can't easily liquidate them without that showing up as a huge loss, thereby affecting your reserve requirements and potentially making you insolvent. If you don't have to sell them and can keep them to maturity, they don't appear as a loss in your accounting. It's the difference between mark-to-market versus held-to-maturity accounting. If you have to sell, you are forced to mark-to-market. If you don't have to sell, you don't have to account for losses due to bond prices falling in the market.
• chollida1 4y ago
  When we speak of liquidity in the business its not can you sell your asset, its can you sell your asset without moving the price. In 2008 you could sell your MBS at any time, it was just for 10 cents on the dollar, that's not liquidity as we use the term. They sold a chunk of long duration assets for a 1.2B loss because they had to sell them. That's a big loss for the quality of assets they were selling. That is what is mean by hard to liquidate. Its true you can always sell anything. It's can you get a price that keeps you solvent that is the liquidity issue. SIVB wasn't selling 2 and 30 year treasuries, they were selling MBS.