Higher inflation would lead to higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose. Making matters worse, higher interest rates have reduced the market value of banks’ other assets as well. Accounting for this implies that U.S. banks’ unrealized losses actually amount to $1.75 trillion, or 80% of their capital. In fact, judging by the quality of their capital, most U.S. banks are technically near insolvency, and hundreds are already fully insolvent. Indeed, some estimates suggest that rising interest rates have increased U.S. banks’ total deposit-franchise value by about $1.75 trillion.