William Ackman, an investor in hedge funds, predicted economic doom on Monday after the collapse of Silicon Valley Bank on Friday.
In a lengthy, 649-word tweet on Saturday, the billionaire warned that uninsured bank customers would rush to withdraw cash on Monday if the government did not step in to guarantee their accounts and “fix an a-soon-to-be-irreversible disaster.”
When its stock price plummeted on Friday due to liquidity concerns related to rising interest rates, the Federal Deposit Insurance Corporation stepped in and took control of the 16th largest bank in the United States, which was a major financier of venture-backed tech and health companies in the country.
The FDIC was unable to protect billions of dollars in deposits from companies and investors, making it the worst bank collapse since the 2008 financial crisis.
Ackman predicts that “the big sucking sound you will hear” will be the departure of nearly all uninsured deposits from SVB unless “systemically significant institutions” (SIBs) like JPMorgan, Citi, or Bank of America acquire the bank before Monday’s market open, which he considers improbable.
According to Bloomberg, the FDIC spent the weekend searching for a bank ready to merge with the failed California institution, and the United States is presently considering the development of a fund that would allow regulators to buttress deposits if more banks fail in the wake of the loss.
“These withdrawals will deplete liquidity from community, regional, and other banks,” Ackman, founder, and CEO of Manhattan’s Pershing Square Capital Management said.
Demand for shorter-term UST is on the rise, which will work against the @federalreserve’s efforts to slow the economy by raising interest rates.
Ackman predicted that “thousands of the fastest growing, most imaginative venture-backed enterprises in the U.S. will begin to fail to make payroll next week” and that “no buyer will arise to acquire the bankrupt bank.”
We cannot allow the failure of the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to permanently impede the ability of our community and regional banks to access low-cost deposits, which would destroy thousands of our nation’s highest potential and highest growth businesses (and the resulting loss of tens of thousands of jobs for some of our most talented younger generation).