They didn’t even pile on the risk, at least not in the 2007/2008 sense. They bought long-dated 10yr US Treasuries (or was it MBS’s? I’ve heard both), since that was one of the lowest risk assets they could invest in and still get enough spread vs their deposits to remain a viable business. It’s strange days when that is considered piling on risk.
While there wasn’t counterparty risk with those assets, there was duration risk. And their mistake seems to have been not selling those the instant the Fed publicly committed to killing inflation with higher interest rates. It should have been clear to them that their exposure to duration risk was rising, and they needed to restructure back in 2021 or early 2022 to mitigate that.
While there wasn’t counterparty risk with those assets, there was duration risk. And their mistake seems to have been not selling those the instant the Fed publicly committed to killing inflation with higher interest rates. It should have been clear to them that their exposure to duration risk was rising, and they needed to restructure back in 2021 or early 2022 to mitigate that.