Ok so you take deposits, which are a short term liability and you've got cash money you have to do something with.
1) Buy loads of long term debt and some swaps.
2) Buy less long term debt than that and t-bills.
These two options are exactly equivalent from a financial perspective. Same risk, same reward, quite similar costs.
If instead you've bought loads of long term debt and not hedged, why did you do that? This is the nub of the thing. Why? Because you couldn't make it pay otherwise with the given market conditions? So you took a punt on inflation and the official rate staying low? Could you have done that differently? Should you have? What were the implications for your business if you didn't take a massive bet on interest rates?
Swaps are entirely beside the point here. Swaps here are just "hey let's not actually make the bet we just went out of our way to make." It's likely going to cost you a little more than not exposing yourself to that risk in the first place. It's like betting on both teams in the superbowl. The house takes a cut.
"Should have hedged with swaps" misses: "why did they have an exposure of that size at all?" Recklessness? Idiocy? Should they be prosecuted for extreme negligence? Were they between a rock and a hard place and took a fairly desperate measure? (Which I'm also not excusing either fwiw).
1) Buy loads of long term debt and some swaps.
2) Buy less long term debt than that and t-bills.
These two options are exactly equivalent from a financial perspective. Same risk, same reward, quite similar costs.
If instead you've bought loads of long term debt and not hedged, why did you do that? This is the nub of the thing. Why? Because you couldn't make it pay otherwise with the given market conditions? So you took a punt on inflation and the official rate staying low? Could you have done that differently? Should you have? What were the implications for your business if you didn't take a massive bet on interest rates?
Swaps are entirely beside the point here. Swaps here are just "hey let's not actually make the bet we just went out of our way to make." It's likely going to cost you a little more than not exposing yourself to that risk in the first place. It's like betting on both teams in the superbowl. The house takes a cut.
"Should have hedged with swaps" misses: "why did they have an exposure of that size at all?" Recklessness? Idiocy? Should they be prosecuted for extreme negligence? Were they between a rock and a hard place and took a fairly desperate measure? (Which I'm also not excusing either fwiw).