[bhawks]

In the GFC the government literally created the Troubled _Asset_ Relief Program. Those MBSs were assets and didn't magically become liabilities.

The problem was the market value of those assets plummeted because no one expected them to generate the agreed upon cash flows because the underlying loans were going into correlated defaults. Despite all this the only party that saw the mortgage as a liability is the individual who's responsibility it was to make a monthly payment on said mortgage.

Outside of swaps and other derivatives financial instruments and other properties don't magically switch from being an asset to being a liability based on random external factors.

This conversation is like accountants talking about processes, threads, fibers and context switching... very imprecisely.

[cbsmith]

> Outside of swaps and other derivatives financial instruments and other properties don't magically switch from being an asset to being a liability based on random external factors.

I wasn't saying they switch; I'm saying they can be both an asset and a liability. Liability isn't strictly an accounting term. It also can refer to something that acts as a disadvantage. Illiquid assets whose valuation can be volatile can be a liability.