from Balaji | by Balaji

Balaji

@balajis

over 2 years ago

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Mr. Lustig is more right than he knows. Because banks *intentionally* hid their insolvency from depositors. Once the Fed had saddled banks with massive losses, they decided to use an accounting trick to pretend this hadn't happened. And then, surprise. t.co/E9ycW5V6Ih t.co/DND0TSI7iR t.co/Glc8LJoR9n

Here's what I've figured out. In 2020-2021, the Fed forecasted low rates. Banks bought bonds on that forecast. Then, surprise! Historic rate hike. All suffered enormous losses. Anxious bankers needed to do something. They preserved optics with an accounting trick. Transferring… t.co/vv4jTRoJet t.co/aQ9gpv1QsI

The strategy "worked" for the banks. Fed saddled banks with huge surprise losses. So banks decided depositors might get a surprise! That's why hid the losses through 2022. Banks knew they might die in a bank run. But just needed other banks to die first. If other banks died, Fed… t.co/neOYdtOyqy t.co/BjMMDMA9xQ