'Raises more questions than it answers', Bill Ackman on First Republic Bank's rescue package2 min read 17 Mar 2023, 11:30 AM IST
Calling out on the $30 billion rescue plan for First Republic Bank, American Investor, Bill Ackman has said that the plan raises more question than it answers
Hitting out at the $30 billion rescue package for First Republic Bank, investor Bill Ackman called it an act of spreading the risk of financial contagion to achieve “false sense of confidence". He regarded the move as a “bad policy" initiated by the US government.
Notably, the decision of rescue plan was formulated by banks with US regulators. It included the contributions from well established banks like JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley.
In his tweet, he said US Treasury Secretary Janet Yellen pushed the Systematically Important Banks to recycle the deposits they received from First Republic Bank, back into it for 120 days. “The result is that FRB default risk is now being spread to our largest banks" he said.
“The market has responded to this fictional vote of confidence with a 35% after-market decline in FRB stock," he added.
Bill Ackman also marked a line distinguishing the condition of First Republic Bank with that of Silicon Valley Bank. He called FRB as “a well-managed, well-capitalized, high-service bank with good assets that is beloved by its clients." He also said the bank run is not FRB's fault and it “does not deserve to fail".
$30 bn rescue raised more questions than it answers
“The press release announcing the $30B of deposits raised more questions than it answers. Lack of transparency causes market participants to assume the worst," said the American investor in his tweet.
At the end of his long post, he made it clear that he has no investments, either long or short, in the banking sector. He is simply concerned about financial contagion risk which is growing and getting out of control. The spiralling financial contagion risk also carries the potential to cause severe economic damage and hardship.
He also asked to act swiftly to take action against the alarming situation that has reached far beyond the hands of private players and demands government and regulators intervention.
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