• Billionaire Bill Ackman has warned of „vast and profound“ consequences if the U.S. government does not guarantee all Silicon Valley Bank (SVB) depositors by Monday morning.
• Ackman stressed that unless JPMorgan, Citibank, or Bank of America acquires Silicon Valley Bank before Monday’s market open, or the government provides a guarantee for all 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).”
• He warned that these withdrawals would drain liquidity from community, regional and other banks and begin the destruction of these important institutions and drive short rates lower complicating the Federal Reserve’s efforts to raise rates to slow the economy.
Billionaire Warns of Imminent Bank Runs
Billionaire Bill Ackman has warned of „vast and profound“ consequences for the U.S. government if it fails to guarantee all Silicon Valley Bank (SVB) depositors by Monday morning. Unless JPMorgan, Citibank, or Bank of America acquires SVB before Monday’s market open, or the government provides a guarantee for all SVB deposits, Ackman warns that „the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ’systemically important banks‘ (SIBs).“
Expected Impact on Banking System
Ackman believes that these withdrawals would drain liquidity from community, regional and other banks and begin the destruction of these important institutions while also driving short rates lower complicating the Federal Reserve’s efforts to raise interest rates in order to slow down economic growth. He added that thousands of venture-backed companies in America could fail to make payroll due to this situation.
Government Has Until Monday Morning
The billionaire has stated that there is until Monday morning for the U.S. government to fix its „soon-to-be-irreversible mistake“. He explained that allowing SVB to fail without protecting all depositors would create an understanding among people about what an uninsured deposit is – an unsecured illiquid claim on a failed bank – thus increasing pressure on transferring cash into UST money market accounts with higher yields than bank deposits offer.
Consequences Are Dire
Ackman cautioned that failing to provide protection for SVB depositors would have dire consequences for both businesses and individuals across America as well as cause disruption in financial markets worldwide . Therefore he urged authorities take action quickly before it was too late in order avoid such catastrophic results which could potentially ripple throughout global economies due lack of trust between customers and financial institutions once again .
Cause Of The Problem
The issue stems from Silicon Valley Bank senior management investing short-term deposits into longer-term fixed rate assets causing a bank run when short term interest rates began falling , leaving many customers unable trust their investments any longer .