The US government “did the right thing” for America by swooping in to save deposit holders at Silicon Valley Bank, according to billionaire investor Bill Ackman, who argued that failure to act could’ g plunge the country into a 1930s-style bank.
In a tweet on Sunday night, the legendary investor shared his thoughts on the collapse of Silicon Valley Bank (SVB) and how the US government responded to the crisis.
“Our government is doing the right thing for the country,” he said. “We are very fortunate to have done this. Importantly, our government sent a message that depositors can trust the banking system. Without this trust, we would have been left with three or possibly four very large failed banks. where the taxpayer is clearly on the hook, and our national system of community and regional banks is toast.
Last week, it was revealed that SVB—is an important lender to start-ups—is scrambling to raise funds to plug a nearly $2 billion hole in its finances.
News of the largest failure of a US bank since the 2008 financial crisis sparked a rush to withdraw deposits, with troubles at SVB as well inflicts collateral damage in stablecoins, payrolls and global banking stocks.
Trading in SVB shares was halted on Friday after plunging 60% a day earlier, with staff IS reported was asked to work from home while the defaulting lender looked for a buyer.
On Monday morning, it emerged that banking giant HSBC had bought SVB’s UK arm for just £1 ($1.21)bailed out many British tech companies that had feared collapse if a rescue deal hadn’t been struck.
However, its US parent company failed to find a buyer. On SundayThe Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Treasury Department announced that all SVB depositors—as well as depositors of Signature Bankwhich also collapsed over the weekend—will be protected without loss to taxpayers thanks to the use of a “systemic risk exception.”
President Joe Biden touted the regulatory intervention as a move that “will protect workers, small businesses, taxpayers, and our financial system.”
Missing the red flags?
Yet the regulators facing questions about whether the red flags disappeared when it came to SVB, Ackman argued that the government’s response to the collapse of SVB was the right one.
Ackman—who founded Perishing Square Capital Management in 2004 and also serves as its CEO—noted Sunday night that regulators’ intervention “is not a bailout in any form,” pointing out that investors and investors that “inadequate management” SVB will bear the consequences of its failure.
The collapse of Silicon Valley Bank will act as a “huge wake up call” to the people who manage banks across America, he added—but he warned that more banks are likely to fail even as regulators entered.
“It’s in [FDIC]the US Treasury and the Federal Reserve had not intervened today, we would have had a 1930s bank run continuing first thing Monday causing massive economic damage and hardship to millions,” said Ackman. “Many banks would probably fail even intervention, but we now have a clear road map of how the government will handle them.”
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