A bank that is insolvent will have negative net worth even if all assets are allowed to mature, whereas an illiquid bank would have positive net worth if it could continue but negative net worth if forced to sell assets immediately; this distinction is central to interpreting the financial crisis but is genuinely hard to determine because bank assets are difficult to value.

definitionpending

Speaker

Arnold Kling

Evidence Quote

if a bank is insolvent it means that... it would still end up having negative net worth... if it's a liquid it means that... if it could keep going it would have positive net worth

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

Loading notes...