Treasury bonds, issued when interest rates were low, have only one way to move as the Fed increases interest rates. Their face value must go down.
An aggressive big bank, making lots of money, may not be watching the balance sheet as closely as it should. So it was with Silicon Valley Bank. Suddenly, SVB realized that it was stuck with lots of Treasury bonds that had lost value. So SVB set about to raise several billion dollars to make its balance sheet look more balanced. Due to this action, unfortunately, some depositors decided that their money might be safer in another bank. Thus, the historic "run on a bank" occurred once again. Within several days, SVB was insolvent. That was last Friday.
As an aside, might I ask what federal agency is responsible for watching bank balance sheets?
On Monday, just two days later, the Fed proposed, again, to ignore history, economics, and common sense. Need I warn them that you can fool Mother Nature and the laws of economics for only so long before you must face the consequences? .................To Read More....
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