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Betting that rates would never ever rise again is idiotic. Regardless of whether it is once in history (hint: it isn’t).

by voisin 4y ago

s1artibartfast 4y ago
I think that's overly simplistic and a bit misleading. Banks weren't betting that rates would stay low, they were betting that their depositors wouldn't run in Mass. How many of your customers will flee is much more difficult to Gauge then if rates will go up. This is why we see winners and losers. Most banks have the same exact Long-term securities and will continue to make money off of them. It isn't as much about the investment as it is the investor. I might make 5% putting money in a CD account. You might put money in the same account and lose 5% because you have to pull out early. The difference is our situation, not the account
- voisin 4y ago
  > Banks weren't betting that rates would stay low, they were betting that their depositors wouldn't run in Mass. I think you are confusing causality. The depositors fled because of the bad bet that rates would stay low. As a bank your entire existence depends on confidence. Make risky bets that rates will stay low forever, and you are eventually going to be proven wrong and then confidence in your institution will drop and depositors will flee.
  - s1artibartfast 4y ago
    Yep there are banks happy sitting on billions of dollars of low interest MBS and securities happily making profit. The assets themselves turn profit no matter what the current interest rate is. You only lose the "bet" when there is a run, not when interest rate Rises. If there is no run on your bank, the MBS will always add to your profit no matter what the Fed rate is.
pempem 4y ago
Woah. No one is saying that and the tone of your comment is honestly wild. Its' betting that they wouldn't raise faster than ever in history. ( yea we all know interest rates were higher and have been subjected to the same posts about interest rates in the 80s) Source: https://www.weforum.org/agenda/2022/10/comparing-the-speed-of-u-s-interest-rate-hikes-1988-2022/ https://www.weforum.org/agenda/2022/10/comparing-the-speed-o...

Betting that rates would never ever rise again is idiotic. Regardless of whether it is once in history (hint: it isn’t).

by voisin 4y ago

Betting that rates would never ever rise again is idiotic. Regardless of whether it is once in history (hint: it isn’t).

s1artibartfast 4y ago

I think that's overly simplistic and a bit misleading. Banks weren't betting that rates would stay low, they were betting that their depositors wouldn't run in Mass. How many of your customers will flee is much more difficult to Gauge then if rates will go up. This is why we see winners and losers. Most banks have the same exact Long-term securities and will continue to make money off of them. It isn't as much about the investment as it is the investor. I might make 5% putting money in a CD account. You might put money in the same account and lose 5% because you have to pull out early. The difference is our situation, not the account

voisin 4y ago
> Banks weren't betting that rates would stay low, they were betting that their depositors wouldn't run in Mass. I think you are confusing causality. The depositors fled because of the bad bet that rates would stay low. As a bank your entire existence depends on confidence. Make risky bets that rates will stay low forever, and you are eventually going to be proven wrong and then confidence in your institution will drop and depositors will flee.
- s1artibartfast 4y ago
  Yep there are banks happy sitting on billions of dollars of low interest MBS and securities happily making profit. The assets themselves turn profit no matter what the current interest rate is. You only lose the "bet" when there is a run, not when interest rate Rises. If there is no run on your bank, the MBS will always add to your profit no matter what the Fed rate is.

pempem 4y ago

Woah. No one is saying that and the tone of your comment is honestly wild. Its' betting that they wouldn't raise faster than ever in history. ( yea we all know interest rates were higher and have been subjected to the same posts about interest rates in the 80s) Source: https://www.weforum.org/agenda/2022/10/comparing-the-speed-of-u-s-interest-rate-hikes-1988-2022/ https://www.weforum.org/agenda/2022/10/comparing-the-speed-o...