Bill Ackman, the billionaire hedge fund manager, has predicted that an “economic meltdown” will occur if U.S. President Joe Biden doesn’t take immediate action to address the banking crisis.
Ackman issued the warning in a lengthy message that he posted to Twitter on Saturday.
The message was precipitated by the recent collapse of the Silicon Valley Bank (SVB).
Fox Business reported:
The Federal Deposit Insurance Corporation (FDIC) announced Friday that it would close Silicon Valley Bank, until then the 16th-largest bank in the U.S., marking the worst U.S. financial institution failure since the Great Recession 15 years ago.
Biden’s 48 hours to act
In his Twitter post, Ackman gave Biden 48 hours to act before the situation becomes “irreversible.”
“The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake,” Ackman began.
By 48 hours, Ackman was referring to Monday morning, when the banks open. Ackman, in his post, goes on to voice concern that customers, in response to the collapse, fearing instability, may decide to withdraw their cash from their accounts.
Then, Ackman, in his message, goes on to demonstrate the knock-on effect that this would have, highlighting potential negative consequences that, in his view, would be likely to result if Biden and the U.S. government do not take action.
“[T]he unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday,” Ackman concluded.
The latest
The federal government did decide to take action before Ackman’s 48-hour period elapsed.
The Associated Press reports:
In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve, and FDIC said Sunday that all Silicon Valley Bank clients would be protected and able to access their money. They also announced steps that are intended to protect the bank’s customers and prevent additional bank runs.
The three agencies released a statement on the matter in which they explained what their action will accomplish. The statement reads:
This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
The federal government’s decision to take action came after it was revealed that a second bank had collapsed on Sunday: the New York-based Signature Bank. According to the Associated Press, this collapse was the third-largest bank failure in U.S. history.
