Billionaire investor Bill Ackman calls for government action to protect depositors
In a recent tweet, Bill Ackman, CEO of Pershing Square, expressed his concerns about the potential failure of SVB Financial Group and the government’s lack of action to protect all depositors. Ackman warns that if the government doesn’t act within the next 48 hours, it could result in irreversible damage to the banking industry.
The tweet emphasizes that allowing an uninsured deposit to fail without protecting all depositors would be a huge mistake. Ackman states that this would cause the world to wake up to the realization that uninsured deposits are an unsecured and illiquid claim on a failed bank.
The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or… https://t.co/SqdkFK7Fld
— Bill Ackman (@BillAckman) March 11, 2023
The CEO goes on to say that if SVB Financial Group fails, the withdrawal of substantially all uninsured deposits from all but the “systemically important banks” will occur. These funds will be transferred to the US Treasury money market funds and short-term US Treasury. This will drain liquidity from community, regional, and other banks, leading to the destruction of these important institutions.
Ackman believes that the increased demand for short-term US Treasury will drive short rates lower and complicate the Federal Reserve’s efforts to raise rates to slow the economy. He also notes that thousands of the fastest-growing and most innovative venture-backed companies in the US will begin to fail to make payroll next week.
Had the government guaranteed SVB’s deposits on Friday in exchange for penny warrants, which would have wiped out the substantial majority of its equity value, this could have been avoided. Ackman claims that this approach would have minimized the risk of any government losses and created the potential for substantial profits from the rescue.
However, Ackman believes that it is now unlikely that any buyer will emerge to acquire the failed bank. The government’s approach has guaranteed that more risk will be concentrated in the systemically important banks at the expense of other banks, which itself creates more systemic risk.
In conclusion, Bill Ackman’s tweet highlights the potential consequences of the government’s inaction and calls for action to protect all depositors. He warns that failure to do so could lead to irreversible damage to the banking industry, the destruction of important institutions, and the loss of thousands of jobs. It remains to be seen whether the government will take heed of Ackman’s warning and take action to prevent this scenario from occurring.
Bill Ackman, born on May 11, 1966, is an American hedge fund manager and billionaire investor. He is the CEO and founder of Pershing Square Capital Management, a company that specializes in hedge fund management. Ackman is known for his investment approach as an activist investor. According to Forbes, as of 2023, his net worth is estimated to be $3.4 billion.
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