• Billionaire Bill Ackman has warned of „vast and profound“ consequences of the U.S. government allowing Silicon Valley Bank (SVB) to fail without protecting all depositors.
• He cautioned that, absent a systemwide FDIC deposit guarantee, more bank runs will begin Monday morning.
• Ackman warned that unless JPMorgan, Citibank, or Bank of America acquire SVB before Monday’s market open, or the government provides a guarantee for all deposits, it will have made an “irreversible mistake” with “vast and profound” consequences.
Warning from Billionaire Bill Ackman
Billionaire Bill Ackman, CEO and portfolio manager of Pershing Square Capital Management, has warned of „vast and profound“ consequences if the U.S. government allows Silicon Valley Bank (SVB) to fail without protecting all depositors. He cautioned that absent a systemwide FDIC deposit guarantee, more bank runs will begin Monday morning unless JPMorgan, Citibank or Bank of America acquires SVB before then or the government provides a guarantee for all deposits.
Deposits at Risk Without Government Guarantee
Ackman noted that no company will take even a tiny chance of losing a dollar of deposits as there is no reward for this risk. He stressed that unless SVB is acquired by one of these three banks or the government offers protection for all its deposits, there will be massive withdrawals from community, regional and other banks which could lead to their destruction as well as thousands of venture-backed companies failing to make payroll next week due to lack of liquidity in the banking system.
Consequences Could Be Irreversible
The billionaire also pointed out that increased demand for short-term US Treasury securities would drive short rates lower complicating the Federal Reserve’s efforts to raise rates in order to slow the economy down – making it harder for businesses to recover after such tremendous disruption caused by failed banks and businesses unable to pay their employees on time due to lack of liquidity in the banking system.
Government Has Until Monday Morning To Act
Ackman tweeted Saturday that the government has until Monday morning to fix its „soon-to-be-irreversible mistake“. He elaborated by saying that allowing SVB to fail without protecting all depositors would wake up people around the world about what an uninsured deposit means – an unsecured illiquid claim on a failed bank with vast and profoundly damaging repercussions should it not act in time before Monday’s market open.
Silicon Valley Banks Senior Managements Error
Finally he explained how this situation came about; noting Silicon Valley Banks senior management made a basic mistake when investing short-term deposits in longer-term fixed rate assets which resulted in a bank run when interest rates dropped suddenly resulting in customers withdrawing funds while they still can without fear they may lose it should something happen afterwards – prompting many other banks follow suit leading us where we are now – on cusp of irreversible financial disaster if nothing is done soon enough