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BREAKING: Billionaire Investor Gives 48-Hour Warning To Biden Before Financial Meltdown

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2 years ago

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Billionaire hedge fund manager Bill Ackman is forecasting an “economic meltdown” within hours of the banks opening up on Monday morning following the failure of Silicon Valley Bank (SVB). Ackman is urging Joe Biden to step in and protect all of the bank’s depositors, warning that inaction could lead to a ripple effect across other smaller banks within the industry.

Silicon Valley Bank (SVB), the 16th largest bank in the United States, collapsed this week. This marks the worst financial institution failure since the Great Recession in 2008. With $209 billion in total assets at the end of 2022, the bank failed after a 60 percent drop in shares due to declining customer deposits, forcing SVB to sell off $1.75 billion in shares.

“The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing SVB 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. Absent JP Morgan, CitiBank or Bank Of America acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs),” Ackman said on Twitter.

“These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the Federal Reserve’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank,” he added.

Ackman’s warning came hours after Greg Becker, the CEO of SVB Financial Group, sent a video message to employees of the bank acknowledging the “incredibly difficult” 48 hours leading up to its collapse on Friday. Becker said he is working with banking regulators to find a partner for the bank, but there is “no guarantee” a deal will be struck.

Ackman predicts bank runs will happen unless the Biden administration bails the bank out:

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“From a source I trust, SVB depositors will get ~50% on Mon/Tues and the balance based on realized value over the next 3-6 months. If this proves true, I expect there will be bank runs beginning Monday am at a large number of non-SIB banks. No company will take even a tiny chance of losing a dollar of deposits as there is no reward for this risk. Absent a systemwide FDIC, deposit guarantee, more bank runs begin Monday am,” he tweeted.

Here is Ackman’s advice on what should happen next:

SVB CEO delivered this video message to his employees over the weekend:

‘It’s with an incredibly heavy heart that I’m here to deliver this message today,’ he said in the video. ‘I want to acknowledge how hard the last 48 hours have been on all of you. I care so much about all of you. It really is so incredibly difficult. I am trying to look past to focus on two things. 1.) I am focusing on you and thinking about the ultimate outcome of what this could be despite this incredibly difficult time. And 2.) I’m focusing on clients”

On Friday, it was revealed that Becker sold $3.57 million of stock in a pre-planned, automated sell-off two weeks before the bank’s collapse. The CFO Daniel Beck also sold 2,000 shares at $287.59 per share on the same day as his boss, ditching $575,000. Becker offloaded 12,451 shares at an average price of $287.42 each on February 27. The price plunged to just $39.49 in premarket Friday before the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets. However, there is no suggestion of any impropriety by either Becker or Beck.

According to CNN, Janet Yellen has signaled that the Government will not be bailing out the bank:

Treasury Secretary Janet Yellen on Sunday ruled out a federal bailout for Silicon Valley Bank following its spectacular collapse last week.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been put in place means that we’re not going to do that again.”

Stay tuned for more on this developing story…



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