5 ms·
What if the FDIC or someone pays all depositors and then takes over the long-term bond portfolio, intending to hold to maturity?
by polio 4y ago
What if the FDIC or someone pays all depositors and then takes over the long-term bond portfolio, intending to hold to maturity?
- koolba 4y agoThat’s an example of someone swooping in to save the day. Whoever does that would not do it for free as the SVB bond portfolio is worth less than the same bonds bought today (rates go up, bond prices go down). No private party is going to hand over billions of dollars for free so either the Feds do it or nobody does.
- throwntoday 4y agoThese startups are kind of the backbone of the tech economy, you'd think this would be a case where the government says "too big to fail" again.
- koolba 4y agoWhen the alternative is going to be handing over stablecoin market dominance to unregulatable foreign entity, it’s not out of question that the government would step in to stabilize the USDC stablecoin market.
- Tan_MSJ 4y agoWhy would they? their long term treasury bills are yielding almost 0% interest rate and current rate is closer to 6%. Ergo, no one is going to buy an out of the money long term asset at par when current yield is significantly higher. No sane rational person would do that.
- slv77 4y agoNo private institutions with hard cash are going to be willing to take the portfolio because of the opportunity cost of investing that money at higher rates of returns. Any institutions that would need to borrow to buy the portfolio would need to borrow at higher interest rates and earn lower rates generating a loss each month. There is now way to take the portfolio without a discount and not have a loss. If there was a way out of this without a loss the bank wouldn’t be insolvent (bankrupt).