American billionaire investor and CEO of hedge fund management company Pershing Square Capital Management Bill Ackman has warned that more US banks are likely to face the same fate as faced by the Silicon Valley Bank (SVB), despite the Biden administration’s intervention. Ackman further that the SVB saga should serve as a huge wake-up call for bank boards and their management.
Ackman tweeted, “More banks will likely fail despite the intervention, but we now have a clear roadmap for how the government 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.”
The investor further endorsed the Biden government’s approach vis-a-vis the Silicon Valley Bank collapse while adding this is not a bailout in any form. He also noted that those who fumbled will face the consequences and investors and bondholders who did not oversee their banks will be zeroed out.
Ackman explained, “Our government 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.”
The Pershing Square Capital Management CEO said towards the end that the government has sent the message that depositors can trust the American banking system. Ackman wrote, “Importantly, our government 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.”
Ackman’s comments come after US President Joe Biden said the Treasury Department and the economic advisers will address the issues at the Silicon Valley Bank (SVB) and the Signature Bank. He added that those responsible for the collapse will be held accountable. Biden also said that the US government will continue to bolster oversight adn regulation of larger banks.
The POTUS tweeted, “I’m firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
The US regulators closed down Signature Bank on Sunday, two days after the authorities shut down Silicon Valley Bank. Before being closed, SVB was the 16th largest lender and a major financier of tech start-ups. It had $209 billion in total assets and nearly $175.4 billion in total deposits as of December 2022.
Also read: From Yes Bank to Silicon Valley Bank: How RBI and US's Fed navigated fallout from the collapse of two mid-sized banks
Also read: BREAKING: HSBC buys UK arm of Silicon Valley Bank
Also read: 'I'm not tech-elite': Startup founder, mom of 4 says SVB collapse is not just a '1% problem'
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