SVB fallout: Bill Ackman praises US govt action, warns more banks likely to fail
- Ackman in his tweet said this cannot be called a bailout; the govt's has sent a message that depositors can trust the banking system.
Pershing Square Capital Management CEO, Bill Ackman, who had earlier urged the US government to protect all of the bank's depositors, today praised the government's intervention in the SVB crisis. “Our gov’t did the right thing. This was not a bailout in any form. The people who screwed up will bear the consequences. The investors who didn’t adequately oversee their banks will be zeroed out and the bondholders will suffer a similar fate,” he said in his latest tweet.
In his tweet, he explained how the steps taken by the government are not a bailout. He compared the events to the 2008 financial crisis, while highlighting that the government at that time had “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 his tweet.
He further warned that more banks could fail despite the intervention, but he added that now the roadmap is clear as to how the government will handle such scenarios. He has called this as a “wake up call” for bank boards and managements.
The government's action to protect depositors' money at SVB sends a “message that depositors can trust the banking system,” Ackman said.
.. further said that if FDIC, US Treasury and US Federal Reserve had not intervened, the SVB closure would have caused “enormous economic damage and hardship to millions”.
In his earlier tweet, Ackman had warned that the government has only 48 hours to act and that government needs to act by Monday to avoid an economic meltdown.
Here is the full text of Ackman's tweet:
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.
Here, shareholders and bond holders have been wiped out. The @FDICgov insurance fund capitalized by premiums paid by banks will absorb any losses. The fund will recoup any losses by assessing more premiums on the banks. Had the @FDICgov @USTreasury and @federalreserve not intervened today, we would have had a 1930s bank run continuing first thing Monday causing enormous economic damage and hardship to millions.
More banks will likely fail despite the intervention, but we now have a clear roadmap for how the gov’t will manage them.
Bank boards and managements have received a massive wake up call. Being a director or CEO of a bank that fails is no fun: years of litigation, regulatory investigations, personal liability, potential civil and criminal charges, and enormous reputational damage.
Our gov’t did the right thing. This was not a bailout in any form. The people who screwed up will bear the consequences. The investors who didn’t adequately oversee their banks will be zeroed out and the bondholders will suffer a similar fate.
Importantly, our gov’t has sent a message that depositors can trust the banking system. Without this confidence, we are left with three or possibly four too-big-to-fail banks where the taxpayer is explicitly on the hook, and our national system of community and regional banks is toast.
Our government did the right thing for the country. We are very fortunate it did so.
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Business NewsNewsWorldSVB fallout: Bill Ackman praises US govt action, warns more banks likely to fail
First Published:13 Mar 2023, 11:01 AM IST
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