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They did not get greedy. They bought bonds, and those bonds turned into a liability. Because the bonds were bought when interest rates were extremely low, they
by gregruss 4y ago
They did not get greedy. They bought bonds, and those bonds turned into a liability. Because the bonds were bought when interest rates were extremely low, they are worth less than bonds at current rates and had to be sold at a loss in order to shore up liquidity. That spooked investors and prompted a run on the bank.
- chii 4y ago> They did not get greedy. They bought bonds they got some bonds which had an interest rate risk, in order to earn a higher interest. This is "greedy", but it would've been fine under normal circumstances, since they did not break any banking regulations.
- HDThoreaun 4y agoYou said they didn't get greedy but the next sentence is the description of an extremely greedy act. They did not need to buy 10 year bonds. They could've bought 1 year bonds, or any other length shorter than 10 years. Or just less 10 year bonds.