Billionaire Bill Ackman said that SVBs senior management made a basic mistake and should be fired. 13525 Total views 110 Total shares Listen to article 0:00 News Own this piece of history
Collect this article as an NFT Billionaire Bill Ackman has urged the United States government to guarantee all deposits held by Silicon Valley Bank (SVB) within the next 48 hours, or it risks the destruction of many financial institutions.
In a March 11 tweet, Bill Ackman, CEO of hedge fund management firm Pershing Square Capital Management, said a giant sucking sound will be heard from the withdrawal of substantially all uninsured depositsfrom all banks,not just the systemically important banks (SIBs), should the government fail to guarantee all of SVBs deposits before the open on Monday.
Ackman suggested that this would be the result of the world realizing what an uninsured deposit is an unsecured illiquid claim on a failed bank.
He warned that these withdrawals would drain liquidity from the community, regional and other banks and begin the destruction of these crucial institutionsif the United States government fails to protect all depositors.
Ackman said the only other way to prevent this was in the unlikely event that major financial institutions, such as JPMorgan Chase, Citibank or Bank of America, acquire SVB before Monday.
He argued that this could have been avoided if the U.S. government had stepped in on Friday to guarantee SVBs deposits, adding that the long-standing banks franchise value could have been safeguarded and transferred to a new owner in return for an equity injection.
Ackman suggested that SVBs senior management made a basic mistake and should be fired. He noted:They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs.
After conducting a back-of-the-envelope review of SVBs balance sheet, Ackman believes that even in a liquidation, depositors should eventually get back approximately 98% of their deposits.
However, he argued that eventually is too long when you have payroll to meet next week.
Ackman tweeted shortly after, reiterating that the Federal Deposit Insurance Corporation (FDIC) should guarantee all SVB bank deposits by Sunday night, along with a proposed plan.
What should the FDIC do? @FDICgov to guarantee all bank deposits by Sunday night before Asia open and call a time out. Run a process to recapitalize @SVB_Financial while managing liquidation of UST and MBS portfolios to be reinvested in short term UST. Determine the capital hole https://t.co/g96k1b7soy Bill Ackman (@BillAckman) March 11, 2023
Related: Silicon Valley Bank failure could trigger run on U.S. regional banks
This comes after Bob Elliot, CEO of investment firm Unlimited, said that the Federal Reserve and FDIC decisions regarding the future of SVB may affect regional banks across the United States, putting trillions of dollars at risk of a bank run.
Elliot stated that nearly a third of deposits in the United States are held in small banks, adding that approximately 50% of those deposits are uninsured. #Banks #Silicon Valley #United States #Regulation
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