Hedge-fund manager Bill Ackman predicted that an “economic meltdown” was looming on Monday following Friday’s collapse of Silicon Valley Bank.
In a rambling, 649-word, one-paragraph tweet Saturday, the billionaire predicted that uninsured bank customers would rush to withdraw cash Monday unless the government steps in to guarantee their funds and “fix a-soon-to-be-irreversible mistake.”
The 16th largest bank in the US, which provided financing for a large chunk of the country’s venture backed tech and health companies, was taken over by the Federal Deposit Insurance Corporation Friday as its stock plummeted due to liquidity concerns tied to rising interest rates.
It marked the largest bank collapse since the 2008 financial crisis, and it stranded billions of dollars belonging to companies and investors, whose deposits in excess of $250,000 are not covered by the FDIC.
“Absent @jpmorgan@citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs),” Ackman wrote.
The FDIC was said to be looking to find a bank that would merge with the failed California institution over the weekend, as the US weight the creation of a fund that would allow regulators to reinforce deposits if other banks fail in the wake of the collapse, according to Bloomberg.
“These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions,” said Ackman, the founder and CEO of Pershing Square Capital Management in Manhattan.
“The increased demand for short-term UST will drive short rates lower complicating the @federalreserve’s efforts to raise rates to slow the economy.”
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Ackman wrote that he thought it was “unlikely any buyer will emerge to acquire the failed bank,” and warned that “thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week.”
“The FDIC’s and OCC’s [Office of the Comptroller of Currency] failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits,” Ackman said.
With Post wires
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