(New York Post) 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 gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or… https://t.co/SqdkFK7Fld
— Bill Ackman (@BillAckman) March 11, 2023
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.”
