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Originally Posted by Yoho
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I’m not sure it’s really a problem here because the Fed is underwriting everything so if banks fail it’s just businesses failing not loss of funds. The underlying T-bills have a low coupon rate so a the value is terrible right now but provided inflation is controlled the real losses are a lot lower.
The Fed just has to work through the process of who is too big to fail and who gets wiped out. This is a little different than the housing crisis where the value of the asset was gone.