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> And if the rate goes up, the banks swallow the losses. Aren’t the mortgages ultimately guaranteed by the European Central Bank? No actual interest risk for t
by hartator 3y ago
> And if the rate goes up, the banks swallow the losses.
Aren’t the mortgages ultimately guaranteed by the European Central Bank? No actual interest risk for the banks.
- judge2020 3y agoNot sure how it works in Europe, but if it's similar to the U.S., the issue is similar to what happened to SVB - they invested a large portion of their cash into low-rate mortgage-backed securities, so when the rates rose, the actual value of the mortgage-backed securities dropped, making it hard to sell them without losing a bunch of money (which was deposits, not their own revenue/profits). The FED did guarantee all money in all accounts - even past $250k - but it's not a great look to be taken over by the fed to ensure money is available for withdrawal to depositors.
- hartator 3y agoSVB was investing Checking accounts money into mid-term bonds. Another kind of scam.
- judge2020 3y agoIt was all within the Fed's fund rate guidelines so I'm not sure how it was so scammy. Or does the the typical bank have a larger amount of short-term investments that can be easily liquidated in case there's a bank run?
- hartator 3y agoCash-equivalent or money market are fine, mid-term bounds are not. > It was all within the Fed's fund rate guidelines so I'm not sure how it was so scammy. SVB people are getting charged with criminal charges.