According to 56-year-old American billionaire and hedge fund manager Bill Ackman, there would be an irreversible economic meltdown if the United States government does not act fast in the Silicon Valley Bank (SVB) saga.
He urged the U.S. government to “guarantee” all deposits held by the Silicon Valley Bank (SVB) within the next two days. If this is not done, there is a huge possibility that several financial institutions will be destroyed in the aftermath.
He stated that all that has happened so far could have been avoided if the government had intervened since Friday to insure the deposits.
However, “The gov’t has about 48 hours to fix a soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank,” Ackman tweeted
In addition, the Pershing Square Capital Management Chief Executive Officer (CEO) requested that the senior management team of SVB be laid off citing the fact that they made a ‘basic mistake’.
“They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs.”
Would JPMorgan, and Citibank be Interested in SVB?
Another solution that he suggested for the current situation while also stating its unlikelihood is the acquisition of the bank by either asset management company JPMorgan Chase, Citibank or Bank of America before Monday.
Transferring the franchise value of the bank to a new investor would have remedied the situation and provided equity injection. In Ackman’s own words, no buyer may want to acquire the “failed bank” at this point.
If none of these is done, “the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST,” Ackman explained.
So far, a couple of crypto platforms have announced their exposure to the “failed bank” including USDC issuer Circle. Circle confirmed that $3.3 billion of its reserve held in cash deposit is custodied at SVB. Even beleaguered cryptocurrency exchange BlockFi reported in its recent bankruptcy filing that he has $227 million in uninsured funds in an SVB project.