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Wrong. This is a case where at first sight it appears that BoA is in a bad situation. On further analysis it appears this is a non-issue, for the reasons you e
by sdfghswe 3y ago
Wrong.
This is a case where at first sight it appears that BoA is in a bad situation. On further analysis it appears this is a non-issue, for the reasons you explained. But going further still, it's obvious it IS an issue. And your flaw is assuming that when a bank says "we're holding them to maturity", they're holding them to maturity.
You see, SV did the same thing. They took some assets that they planned to hold to maturity if all goes well, but then used the same assets to tell regulators "don't worry guys, we have enough liquidity because there's these things here which we can sell if we really need to". Before SV went bankrupt a naive observer could've asked the question: if all clients decided to pull money, did they have enough liquidity without having to touch these assets, and the answer would've been No.
Whether this is a problem for BoA depends on the answer to this same question. It's far from obvious that this is a non-issue.
- lotsofpulp 3y agoIt is a non issue because based on previous actions there is no way the US government lets BoA fail.
- sdfghswe 3y agoWhat previous actions? Previous actions were that the US gov did let SV and First Republic fail.
- happycube 3y ago2008-2009. BoA is in the Too Big To Fail tier, unlike SVB and First Republic (which got bought/absorbed by Chase, which is another TBTF)
- lotsofpulp 3y agoSV and First Republic were rounding errors. Previous actions would be in 2008, when they outright said they were not going to let any of the big banks fail. https://www.federalreserve.gov/newsevents/testimony/bernanke20100902a.htm https://www.federalreserve.gov/newsevents/testimony/bernanke... Scroll down to the “Too Big to Fail” section.
- sdfghswe 3y agoI prefer to work on most recent data. Good luck.
- lotsofpulp 3y agohttps://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... >March 12, 2023 >Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors
- sdfghswe 3y agoThey literally just let 2 banks fail lol do you have an agenda or something?
- zie 3y ago1) That wasn't the Federal Reserve, that was the FDIC that let the banks fail. 2) This program linked to is because of the failure, it happened after. 3) There is absolutely no way any US govt entity will let BOA fail. They might let it "pretend fail", where they essentially just replace all the senior officers and CEO, but even that's pretty unlikely. The FDIC let those 2 banks fail, because those 2 banks were literally idiotic in their running of the bank. SVB had nobody in charge of bank risk for a long time before it failed. They were playing ostrich and hoping life passed them by and nobody noticed how stupid they were. BOA in the meantime has a pretty strong staff in place, their risk department is staffed and active, and they are doing everything they can to survive without needing the govt's help. It's likely(but not certain) they will survive without any extra govt help.
- deleted 3y ago[deleted]