2 ms·
> 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 depos
by 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 agoYep 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.