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From the IRS's website: A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. But if you're a bank it's a different story, b

From the IRS's website: A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. But if you're a bank it's a different story, because it's unclear what your assets actually are. It's possible that your liabilities are secretly also assets, that's what happens when you get a bailout. Because of that it's somewhat meaningless to call a bank insolvent. But if we want the term to have meaning for banks, and we take the simple definition that the irs has then I believe all of the banks are insolvent. None of them have enough assets to cover their liabilities. https://www.irs.gov/newsroom/what-if-i-am-insolvent https://www.irs.gov/newsroom/what-if-i-am-insolvent

legitster 3y ago
In the case of the report, they are only counting assets as the bank's investment purchases. But banks also usually have money from investors. So in a lot of cases investors will eat the loss until such a time as the banks have cycled through their bad investments. And presumably there is a lot of upside if their newer investments are getting set at a much higher interest rate.
- yuliyp 3y ago
  I still don't understand what you're thinking of as assets vs liabilities for a bank. A bank's assets are any cash it has on hand, plus any loans it issued / bonds it purchased (I think that's what you meant by investment assets?). A bank's liabilities are its deposits as well as any other money raised via bonds. It's not clear at all what you're referring to as "money from investors" as that could mean money the bank borrowed (so show up as liabilities) or it could mean money raised via sale of stock (which is not a liability, but shows up as owners equity).
  - legitster 3y ago
    It's hard to understand what the article itself is claiming - it isn't clear what they are citing, but I read it as the banks being underwater on their investments specifically. Which could be true but they still have capital reserves and equity. And also, as the report they actually cited points out, not all capital reserves are created equal. And it's the amount of uninsured deposits that predicts their risk of a bank flight.
tmaly 3y ago
First thing that popped in my head was the quote “War is peace. Freedom is slavery. Ignorance is strength.” They keep changing the definitions. First what is a recession now what is insolvent. What are people to believe?

legitster 3y ago

In the case of the report, they are only counting assets as the bank's investment purchases. But banks also usually have money from investors. So in a lot of cases investors will eat the loss until such a time as the banks have cycled through their bad investments. And presumably there is a lot of upside if their newer investments are getting set at a much higher interest rate.

yuliyp 3y ago
I still don't understand what you're thinking of as assets vs liabilities for a bank. A bank's assets are any cash it has on hand, plus any loans it issued / bonds it purchased (I think that's what you meant by investment assets?). A bank's liabilities are its deposits as well as any other money raised via bonds. It's not clear at all what you're referring to as "money from investors" as that could mean money the bank borrowed (so show up as liabilities) or it could mean money raised via sale of stock (which is not a liability, but shows up as owners equity).
- legitster 3y ago
  It's hard to understand what the article itself is claiming - it isn't clear what they are citing, but I read it as the banks being underwater on their investments specifically. Which could be true but they still have capital reserves and equity. And also, as the report they actually cited points out, not all capital reserves are created equal. And it's the amount of uninsured deposits that predicts their risk of a bank flight.

tmaly 3y ago

First thing that popped in my head was the quote “War is peace. Freedom is slavery. Ignorance is strength.” They keep changing the definitions. First what is a recession now what is insolvent. What are people to believe?