Billionaire hedge fund manager Bill Ackman believes that more banks will fail even if U.S. authorities intervene to restore confidence in the banking system following the failure of Silicon Valley Bank and Signature Bank last week. Alsp, the U.S. government’s move to guarantee deposits in the aftermath of the failures of Silicon Valley Bank and Signature Bank is not a “bailout in any form.”
He stated that the government injected money into banks in the form of preferred stock during the Global Financial Crisis from 2007 to 2009, protecting bondholders and shareholders, but that this time is different.
This time, depositors are protected by the Federal Deposit Insurance Corporation insurance program, which is funded by bank premiums, he said, adding, “The fund will recoup any losses by assessing additional premiums on the banks.”
He went on to criticize the government’s response on Saturday, predicting “economic meltdown” within hours of banks opening on Monday. He had previously urged the US government to intervene and protect all of the bank’s depositors, and while he applauded the move when it occurred, he warned that it was unlikely to prevent more financial institutions from collapsing.
“This was not a bailout. During the GFC, the gov’t injected taxpayer money in the form of preferred stock into banks. Bondholders were protected and shareholders were diluted to varying degrees. Taxpayer money was put at great risk. Many people who screwed up suffered minimal to no consequences. Those were bailouts,” he said in a Tweet.
He added that if there had been no intervention, a 1930s-style bank run would have continued, causing enormous economic damage and hardship to millions. And that, despite the intervention, more banks will likely fail, but there is a clear roadmap for how the government will manage them. He claims that bank boards and management have been given a massive wake-up call, and that being a director or CEO of a failing bank is no fun, so everyone should buckle up.
The sources for this piece include an article in BusinessInsider.