“Hold to Maturity” Is Not a Safety Net — It’s a Lie About Risk
- Steadfast Equity
- May 31
- 3 min read
In the wake of Silicon Valley Bank and Signature Bank’s collapses, the defenders of institutional negligence offered up a familiar line:
“It’s not a real loss. The securities will recover if held to maturity.”
It sounds soothing. Almost responsible. But like most half-truths in finance, it crumbles under basic scrutiny.
Let’s call it what it is:
A sleight-of-hand excuse to mask failure, shift blame, and normalize bad decision-making—on your dime.
📉 The Time Value of Money Still Exists
Here’s the problem with the “hold to maturity” narrative: it pretends the time value of money doesn’t matter.
If a bank locks up billions in long-duration assets (e.g., Treasuries or mortgage-backed securities) at 1.5% yield, and interest rates later rise to 4.5%, those assets are functionally impaired—even if their notional value returns in 10 years.
Because what was lost was the opportunity to reinvest at higher yield. That’s not paper. That’s real.
So yes, maybe the principal comes back in 2033. But the economic value—the purchasing power, the compounding potential, the opportunity to put that capital to more productive use—is gone. Permanently.
Loss isn’t just measured in dollars. It’s measured in what those dollars could’ve done.
💸 $22 Billion in Government Coverage ≠ Free
When the FDIC absorbed $22 billion in losses to cover uninsured deposits at SVB and Signature, the official story was stability. But the actual result?
$22B that could have been allocated to infrastructure, innovation, energy security, or productivity-enhancing investments—gone.
Capital misused to bail out failed asset-liability management, not incentivize stronger systems.
A signal to the market that accountability is optional if you’re large enough.
And that cost didn’t just disappear.
It will come back to you through:
Higher FDIC fees (passed on to your bank accounts)
Lower yields on savings (to offset premiums)
Higher taxes (as deficits mount)
Inflation (if deficits are monetized, as they have been for over a decade)
The bill gets paid. It always does. The only question is: by whom, and when?
🧠 The Real Risk: Moral Hazard
When institutions realize they can overextend into risky duration mismatches, hide behind hold-to-maturity accounting, and rely on federal rescue when it implodes, we don’t get less of that behavior.
We get more.
No lesson was learned. No structural warning was given. No real penalty was enforced.
So next time, another institution will:
Max out their carry trade,
Pay themselves bonuses on mark-to-model profits,
And walk away when it unravels—leaving the public to eat the fallout.
The real cost isn’t this collapse. It’s the next ten collapses we’ve just guaranteed.
🏛 Systemic Decay Begins With Excuses
This isn’t just about banks. It’s about cultural discipline. It’s about systems that reward prudent behavior and penalize recklessness.
The “hold to maturity” excuse is the financial equivalent of spitting gum on the sidewalk—small in isolation, corrosive in aggregate. It signals that the rules don’t matter if you’re politically connected, systemically important, or loud enough to trigger a bailout.
In Japan, when someone drops trash, another picks it up. Not because the law says so—but because society depends on shared standards.
In finance, the same should apply. When an institution takes bad risk, it should fail. Not be memorialized. Not be forgiven by spreadsheet.
Because if every bad bet is just “a future recovery,” and every disaster is just “paper loss,” then capital discipline dies—and with it, real progress.
🧱 What We Believe
At Steadfast Equity, we’re not in the business of fantasy valuations or offloading downside risk onto others.
We structure investments with real underwriting.
We avoid leverage games that look good on quarterly slides but implode in stress tests.
We value capital because we respect the opportunity cost of using it poorly.
We believe the cost of capital is sacred. And wasting it—on bailouts, bad bets, or broken promises—is theft from the productive future.
This is why we don’t run “to maturity” models. We run reality-based portfolios.
Because return with discipline is rare. But return without it? That’s the biggest risk of all.
Want to understand how our investment structures work?
