Monetary Tightening and U.S. Bank Fragility in 2023(papers.ssrn.com)
papers.ssrn.com
Monetary Tightening and U.S. Bank Fragility in 2023
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4387676
2 comments
The paper does a few things, including calculating bank assets marked-to-market losses, calculating bank insolvency, and simulating bank runs under a couple of scenarios. The conclusions are pretty concerning - the US banking system's market value of assets is $2 trillion lower than book value and under the simulated conditions (not totally sure how feasible) 186 banks fail. At least one of these is a >$1T bank.
"During the 1980s and 1990s, nearly one-third of savings and loan institutions failed due to losses incurred from long-term fixed-rate mortgages that declined in value when interest rates surged."
History is repeating itself.
History is repeating itself.