3 ms·
Bank runs result from depositors who suddenly lose confidence in the safety of their money. MMFs are not causing runs per se, but maybe bank walks. However the
by bagacrap 3y ago
Bank runs result from depositors who suddenly lose confidence in the safety of their money. MMFs are not causing runs per se, but maybe bank walks. However the officially released data has shown that this isn't happening in recent weeks.
I agree the gov't screwed over the banks here. I'm not sure how forcing MTM alone would help. What we'd have needed is better regulation, or simply more thoughtful monetary policy.
For BoA, if you stare at the balance sheet, sure it looks not great. If no one ever looks at it, things probably work out just fine, because again, only thing that is going to cause an issue is if alarmists start spreading FUD and folks start yanking deposits.
- throwawayhdbck 3y agoYeah fair. I think MTM helps here because it forces the regulators hands a bit. If all these banks had to go out and raise capital in the summer and fall of 2022, because their regulator comes in and say "Hey, your undercapitalized, fix that.", then they probably don't go under 6 months later. Where I think we need to agree to disagree is you seem to think the run it's self is the problem, whereas I believe the insolvency which spooked the herd is the issue.
- bagacrap 3y agoAnnouncing a capital raise is what pushed SVB over the edge (triggered the run). I don't see how doing that in summer or fall of last year would have helped. If anything their position was slightly improved by the time of the run as compared to October when the ten year yield was peaking.