Despite government intervention in the Silicon Valley Bank collapse, more banks are still likely on the road to failure, Pershing Square founder Bill Ackman warned.
Ackman cheered and defended the government's decision to guarantee deposits above the federally insured ceiling of $250,000, stressing it"was not a bailout in any form" and that the government has provided a road map for addressing the coming storm of possible bank failures."More banks will likely fail despite the intervention, but we now have a clear roadmap for how the gov’t will manage them.
— Bill Ackman March 13, 2023 On Sunday, the heads of the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation announced that depositors in SVB will get access to their money on Monday, backstopping deposit withdrawals in a move intended to stave off contagion or spread of SVB-induced panic across the financial system.
Critics have bristled at the government's actions, decrying it as a de facto bailout. The actions came after the FDIC reportedly commenced an auction for SVB. Treasury Secretary Janet Yellen appeared to rule out a traditional federal bailout earlier in the day Sunday."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.
Under FDIC policy, deposits are typically guaranteed up to $250,000, but many SVB deposits exceeded that threshold. Over the weekend, government officials combed through various options to safeguard depositors. In addition to the deposit backstopping, the Federal Reserve announced plans to offer banks a facility to help them meet depositor withdrawals.
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