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They were also a victim of massive success: their deposits skyrocketed and they did not have anywhere to put the money. This is not unlike the same problem weal
by skeeter2020 4y ago
They were also a victim of massive success: their deposits skyrocketed and they did not have anywhere to put the money. This is not unlike the same problem wealthy individuals had for the past 10 years if they felt like the stock market was over-valued; nothing else was paying any return. Now imagine your depositors start increasing their withdrawl rate and you're locked in 10 year bonds at < 2%. Uh oh...
- brookst 4y agoIt was the greed of seeking high returns even though their value would drop for the same conditions that would cause depositors to need their money. The bank would still exist, and just have been less profitable in previous years, if they had hedged against interest rate increases.