Billionaire Bill Ackman warns that the clock is ticking for the US government to rectify a “soon-to-be-irreversible-mistake”
, besides the “systemically important banks ,” should the government fail to “guarantee all” of SVB’s deposits before the “open on Monday.”
Ackman suggested that this would be the result of"the world" realizing what an uninsured deposit is – “an unsecured illiquid claim on a failed bank.” He warned that these withdrawals will “drain liquidity,” from community, regional and other banks and “begin the destruction” of theseAckman said that the only other way to prevent this from happening, was in the “unlikely” event that major financial institutions such as J.P. Morgan, Citibank or Bank of America, acquire SVB before Monday.
It was argued by Ackman that this all could have been “avoided” if the U.S. government had “stepped in on Friday” to guarantee SVB’s deposits, adding that the long-standing bank’s “franchise value” could have been safeguarded and"transferred" to a new owner in return for an “equity injection.”“They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs.
After conducting a “back-of-the-envelope review” of SVB’s balance sheet, Ackman believes that even “in a liquidation,” depositors “should eventually” get back approximately “98% of their deposits”.Ackman tweeted shortly after, reiterating that the Federal Deposit Insurance Corporation should guarantee all SVB bank deposits by Sunday night, along with a proposed plan.
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