"Me thinks you dont understand finance (or just dont like smarty's facts)."
I think you're too lazy to read their financials. Here are the facts on their $30 billion plus investment security portfolio.
1. 99% are gov't guaranteed.
2. The vast majority of the portfolio is mbs/gse. The duration is very short - 3 years. Therefore, any change in interest rates does not materially impact their financials.
3.. 30% of their investment portfolio is based on variable rates.
4. About 40% of their portfolio is held to maturity and therefore is carried at cost.
5. The balance are securities available for sale. They are carried at fair value. Any change in value is recorded as an unrealized gain/loss in other comprehensive income. It is not run through their income statement unless they sell the security. As the securities approach maturity, the securities are written up or down to par with the contra entry booked against other comprehensive income. No p&l impact.
6. The commercial banking system currently has unrealized gains on their mbs/gse portfolio of about $30 billion.
You, smarty and queefoo need to enroll accounting 101.