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| Seems odd. I've heard discussion that banks were considering this. Taking a one time hit is the same mathematically as leaving low yielding bonds on balance sheet until maturity, assuming they reinvested into market rate bonds at higher yield with similar maturity. The theory is have one bad year and move on. I wouldn't do that, don't want the hit to capital, but I've heard it discussed. It makes me wonder though, if they wanted to get these off balance sheet to more properly align their GAP. Perhaps they reinvested into different duration to be less interest rate sensitive moving forward. Or, perhaps they needed the liquidity... but that seems odd given they could have pledged and borrowed under BTFP.
My gut instinct though... they did the band aid rip. One bad year, then move on. That way execs get their good bonuses again moving forward. Or maybe I'm too cynical. | |
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reality check a story about Banks
