Bill Ackman Calls SVB Crisis A 'Break-the-Buck Moment,' Says Biden Will Be Blamed 'If This Goes Down Poorly'

Pershing Square Capital Management’s Bill Ackman is calling out not only the management at Silicon Valley Bank, but also the federal government for not properly monitoring the bank’s activity, leading to the collapse of the SVB Financial Group SIVB subsidiary on Friday.

Who's To Blame For SVB Crisis: Speaking on a Twitter Space on Saturday, Ackman pointed the finger directly at the bank’s board and senior management team for the mismanagement of the institution, and called for their removal and replacement with a new team. He highlighted the fact that most of SVB's held-to-maturity securities consisted of mortgage bonds issued by government-sponsored entities, such as Fannie Mae and Freddie Mac. He also said the bank's collapse was an "oversight failure" by the government, which was equally responsible.

He described the bank’s failure as a “break-the-buck moment in banking,” adding that if the government doesn’t step in and fully guarantee all the bank’s deposits, it “could really destroy the economy and cause a lot of hardship.”

Also Read: Roku Has 26% Of Cash With SVB Financial, Deposit Recovery Uncertain — 27 Other Companies With Ties To Collapsed Bank

Impact On Banking: “You’ll see very rapid capital flight” from small institution and other institutions with exposure to private equity and venture capital, Ackman said. At a minimum, the collapse will “massively increase the cost of capital for smaller institutions as compared to bigger institutions,” he added.

Ackman explained that SVB was uniquely positioned to experience the failure, describing the bank as “an outlier in terms of exposure” and concentration of customers in the tech sector. He said the problem was exacerbated by the community being connected on Twitter, so when Peter Thiel said “pull your money,” the reaction of SVB customers was immediate.

What It Means For The Fed: Ackman said Friday’s development will likely affect the Fed’s decision on rates later this month. He expects the central bank to pause any further hikes at this point, describing the failure of SVB as “extremely deflationary,” pointing out that 56,000 businesses could get blown up in the process.

Ultimately, Ackman hopes government officials take action on Monday, adding that, “They’ll have no choice by Wednesday or Thursday.” He noted that by waiting a few days the damage will be much greater.

"This will be a disaster for the Biden Administration if this goes down poorly on Monday," Ackman said. "He's (Biden) is ultimately responsible... he'll take the fall."

Now Read: SVB Financial CEO Sold $3.6M In Shares Prior To Bank's Collapse: Here Are Other Insider Sellers

Photo: Illustration from BZ and Shutterstock

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: GovernmentNewsRegulationsBill AckmanExpert IdeasSilicon Valley Bank
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...