top | item 35105447 (no title) ves | 3 years ago right, which is why this is a liquidity problem and not a solvency one. The assets cover the liabilities--you just have to wait ten years or whatever. discuss order hn newest oldgradstudent|3 years ago No.Those are short term liabilities. The ability of depositors to withdraw their funds is part of the liability.If the bank wanted to raise long term deposits it would have had to pay much higher interest rates.Once they withdraw the bank can not raise additional funds because all other depositors have better interest rates in other banks.No amount of time will cure this situation, the values of those bonds will not recover. This is not some temporary panic.The only way for the situation to improve is if interest rates go down in the short term. Unless that happens, the bank remain insolvent. jahewson|3 years ago No their bounds are worth fundamentally less than they paid for them. whimsicalism|3 years ago There is a continuum in how quickly you need to sell and the price you willmget for something.
oldgradstudent|3 years ago No.Those are short term liabilities. The ability of depositors to withdraw their funds is part of the liability.If the bank wanted to raise long term deposits it would have had to pay much higher interest rates.Once they withdraw the bank can not raise additional funds because all other depositors have better interest rates in other banks.No amount of time will cure this situation, the values of those bonds will not recover. This is not some temporary panic.The only way for the situation to improve is if interest rates go down in the short term. Unless that happens, the bank remain insolvent.
jahewson|3 years ago No their bounds are worth fundamentally less than they paid for them. whimsicalism|3 years ago There is a continuum in how quickly you need to sell and the price you willmget for something.
whimsicalism|3 years ago There is a continuum in how quickly you need to sell and the price you willmget for something.
oldgradstudent|3 years ago
Those are short term liabilities. The ability of depositors to withdraw their funds is part of the liability.
If the bank wanted to raise long term deposits it would have had to pay much higher interest rates.
Once they withdraw the bank can not raise additional funds because all other depositors have better interest rates in other banks.
No amount of time will cure this situation, the values of those bonds will not recover. This is not some temporary panic.
The only way for the situation to improve is if interest rates go down in the short term. Unless that happens, the bank remain insolvent.
jahewson|3 years ago
whimsicalism|3 years ago