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> SVB would have held them to maturity had the bank run not happened, and now somebody else will instead This "somebody" is the government aka the central bank
by aeyes 4y ago
> SVB would have held them to maturity had the bank run not happened, and now somebody else will instead
This "somebody" is the government aka the central bank putting these bonds on their balance sheet. This is a new form of quantitative easing.
- s1artibartfast 4y agoThis is not true. SVB had 91 billion in hold-to-maturity securities. These were auctioned off to other Banks. The FED did not take them. If the Fed did take them, it would be a drop in the ocean. The FED is already holding 2.7 trillion dollars of underwater mortgage-backed securities they bought. They have six trillion dollars of other securities they are holding. Nobody can do a bank run on the Fed and they control the interest rate, so despite their colossal unrealized losses, they can wait it out.
- aeyes 4y agoYou might want to have another look at the Fed balance sheet this week: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL Months of work undone by loaning to banks which made risky investments betting against high interest rates. Any uptick on this graph is equal to printing money which causes inflation. They can wait it out while we collectively pay the cost of this increased money supply.
- s1artibartfast 4y agoIm not sure if you are agreeing with me or not. This seems consistent with what I was saying.