billionaire hedge fund manager Bill Ackman predicts an “economic meltdown” within hours of banks reopening Monday morning following the failure of Silicon Valley Bank.
Ackman calls for the U.S. government to finally step in and protect all of the bank’s depositors, and if nothing is done, Ripple effect to other smaller banks in the industry.
The concern is that customers will rush to withdraw cash from their accounts, fearing that the entire banking system will be destabilized and a domino effect will very likely occur.
Ackman is asking the government to fix “immediately irreversible mistakes” by Monday morning to prevent such a disastrous scenario from happening.
His ominous warning is that SVB Financial Group chief executive Greg Becker sent a video message to bank employees saying that the 48 hours leading up to Friday’s collapse were “incredibly difficult”. It happened hours after he admitted that
Billionaire hedge fund manager Bill Ackman is predicting an economic meltdown following Friday’s failure of Silicon Valley Bank.
Ackman believes there could be ripple effects for other smaller banks in the industry and called on the government to take action by Monday morning to prevent such a dire scenario. increase.
“It is with a very heavy heart that I am here to deliver this message today,” he said in the video. I care so much about it, it’s really incredibly difficult.
“I try to look back and focus on two things. And 2.) I am client focused.
Friday’s Silicon Valley bank failure was the worst U.S. financial institution failure since the Great Recession, with total assets reaching $209 billion at the end of 2022.
The 16th largest bank in the United States collapsed after its shares fell 60% due to falling customer deposits, forcing SVB to sell its $1.75 billion stake.
The FDIC controls lenders, but Becker said it is working with banking regulators to find a bank partner, but there is “no guarantee” that a deal will go through.
Becker spoke from a room surrounded by dark cabinets, wearing a black zip-up jacket with the logo of Scottish luxury golf resort Gleneagles.
“As you heard this morning, I am no longer making those decisions. I am wondering what to do.
“I can’t imagine what was going on in your head and wondering about your job or your future. It’s about figuring out how to keep some and hopefully finding the right partners that the FDIC can work with to keep this agency going in some form or fashion.
He asked employees to “hang out, support each other, support clients, and work together” to achieve better results for the company.
“Thank you and my heart is with you,” he said.
On Friday, how Becker Two weeks before the bank collapse, it sold $3.57 million of stock in a pre-planned automated sale, and CFO Daniel Beck sold 2,000 shares at $287.59 per share on the same day as his boss. , sold for $575,000.
Becker sold 12,451 shares on February 27 at an average price of $287.42. Pre-market prices plummeted to just $39.49 on Friday before the Federal Deposit Insurance Corporation (FDIC) seized bank assets.
There is nothing to suggest that neither Becker nor Beck are inappropriate.
SVB Financial Group Chief Executive Greg Becker admitted in a video message to bank employees that the 48 hours leading up to Friday’s collapse were “incredibly difficult”.
Greg Becker (left) sold 12,451 shares on February 27 at an average price of $287.42. SVB’s CFO Daniel Beck (right) sold his 2,000 shares on the same day as his boss for $287.59 per share. Pre-market prices plummeted to just $39.49 on Friday before the Federal Deposit Insurance Corporation (FDIC) seized assets.
Greg Becker sold 12,451 shares on February 27 at an average price of $287.42. Pre-market prices plunged to just $39.49 on Friday before the Federal Deposit Insurance Corporation seized the assets.
Billionaire Ackman predicts that people will withdraw large amounts of uninsured deposits from systemically insignificant banks and transfer them to US Treasury money market funds and short-term USTs.
Ackman, who oversees about $16 billion in assets at hedge fund Pershing Square Capital Management, criticized the government’s response so far.
“If private capital cannot provide a solution, then a highly dilute government (government) priority remedy should be considered,” he wrote at the beginning of a lengthy tweet on Saturday.
Ackman said allowing the SVB to fail without protecting all depositors shows that uninsured deposits are unsecured illiquidity claims against failing banks.
For FDIC-insured banks, only $250,000 per account is guaranteed.
However, according to the SVB’s latest annual report, 96% of its total deposits of $173 billion were uninsured.
The FDIC said on Friday that all accounts will have immediate access to the guaranteed portion of deposits, but the rest will depend on how much is recovered from the sale of bank assets.
Ackman said the collapse of the SVB “could destroy an important long-term engine of the economy.”
The billionaire predicts that as a result, people will withdraw large amounts of uninsured deposits from systemically unimportant banks and transfer them to US Treasury money market funds and short-term USTs.
“By allowing @SVB_Financial to fail all depositors without protection, the world realized what uninsured deposits are: unsecured and illiquid claims on failing banks ‘ he insisted.
“These funds will be transferred to SIBs, US Treasury (UST) money market funds, and short-term USTs. There is already pressure to transfer cash into money market accounts.
Ackman believes that when depositors start draining money from local and community banks, “the destruction of these vital institutions” will begin.
Systemically insignificant banks are financial institutions whose failure would not be expected to pose a significant threat to the stability of the overall financial system.
These banks are generally smaller, with lower levels of assets and deposits than larger, well-known and systemically important banks.
Ackman believes that when depositors start draining money from local and community banks, “the destruction of these vital institutions” begins.
He argues that the US government could have prevented the SVB from collapsing and created profit potential by guaranteeing the SVB’s deposits in exchange for the penny warrant.
Ackman isn’t the only one with such views.
“The US banking system is on the brink of a much bigger collapse than it did in 2008,” economist Peter Schiff said Friday.
“Banks hold long-term bonds with ultra-low interest rates. said Schiff, who is known for his dire predictions.
Mr. Ackman said that it is unlikely that there will ever be a buyer to buy a failing bank now, and that the government’s approach will focus more risk on systemically important banks at the expense of other banks, allowing them to absorb more systemic risk. I predict that it will produce
“I think it’s unlikely that we’ll see a buyer to buy a failed bank,” he wrote. “The government’s approach has ensured that more risk is concentrated in SIBs at the expense of other banks, which itself creates more systemic risk.”
“Thousands of our nation’s most promising and fastest growing businesses should not be allowed to be destroyed because the FDIC and OCC have failed to do their job (and, as a result, the most talented (Thousands of jobs will be lost for a certain young generation.) At the same time, it will permanently undermine access to low-cost deposits at our community and local banks,” Ackman suggested.
Ackman also criticized the failures of the FDIC and the Office of the Comptroller of the Currency (OCC).
He argued that their failures should not be allowed to cause the destruction of thousands of potential, high-growth businesses, resulting in the loss of tens of thousands of jobs for the younger generation, rather than low-income communities and local banks. We also believe that permanently undermining access to interest rates should not be allowed. cost security deposit.
Despite the fear and uncertainty surrounding the SVB’s failure, the White House insisted that post-2008 reforms would protect the US economy.
Cecilia Rouse, chair of the White House Committee of Economic Advisers, stressed that the banking system today is in a fundamentally different place than it was a decade ago, thanks to the reforms implemented.
“Our banking system is in a fundamentally different place than it was before. The reforms put in place at the time really provide the kind of resilience we were hoping for,” Rouse explained. .
https://www.dailymail.co.uk/news/article-11849813/Billionaire-investor-Bill-Ackman-warns-banks-collapse-tens-thousands-jobs-lost.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 Billionaire investor Bill Ackman warns more banks will collapse, tens of thousands of jobs lost