Bank regulators pushed banks to buy treasuries at 2%. When depositors got spooked and withdrew their money, the banks couldn't cash in their bonds at par, they are now worth about 60% of face value. So once again, it was the government's dead hand on industry that caused the problem. The Fed could just guarantee the bonds at par, thereby assuring depositors, but they won't. I have no idea why. Makes too much sense, I suppose.
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It's all downhill from here!
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