![His job was risk, but his focus was race. wow – The Donald – America First His job was risk, but his focus was race. wow – The Donald – America First](https://media.patriots.win/post/XEduiT4stHzG.jpeg)
From what I read, they totally mismanaged their risk by chasing extra profits.
For many years, interest rates on short- and medium-term bonds were close to zero, due to quantitative easing. To increase their profits, they invested heavily in long-term bonds (10 years or more).
When the Federal Reserve raised interest rates in the last 2 years, these 10+ year bonds lost a lot of their value. (When interest rates rise, existing bonds lose value, because instead you could buy a new bond with a higher yield.) Suddenly, the bank was insolvent. Theoretically they could have been solvent… if customers were willing to leave deposits there earning 0% when they can get more elsewhere. Instead, customers withdrew their money, were forced to start selling the bonds at a loss, and became insolvent.
Unlike FTX, which tried to keep the scam going until the last dollar was gone, the FDIC stepped in and shut the bank down. This means that customers should get a larger percentage of their money back instead of giving 100% to customers who withdrew first and 0% to others.
So the “bad risk” was overinvestment in long-term bonds. If they had a mix of short-term and long-term bonds, they would have lost money on the long-term bonds, but could have reinvested in the short-term bonds for a higher return.