I should have phrased it differently. The potentially large unrealized capital losses on UST sitting on bank balance sheets has been under-reported. Banks are both required to hold UST and not always required to mark-to-market. This interest rate move has been massive relatively speaking, leaving some number of banks in a terrible capital position, just waiting for a disturbance (like the FTX implosion) to trigger run-like conditions.
This story sketches a problem that hopefully doesn't start to gather steam:
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I should have phrased it differently. The potentially large unrealized capital losses on UST sitting on bank balance sheets has been under-reported. Banks are both required to hold UST and not always required to mark-to-market. This interest rate move has been massive relatively speaking, leaving some number of banks in a terrible capital position, just waiting for a disturbance (like the FTX implosion) to trigger run-like conditions.
This story sketches a problem that hopefully doesn't start to gather steam:
https://www.axios.com/2023/03/04/why-some-banks-are-heading-...