Billionaire investor Bill Ackman said the U.S. government’s action to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system.
In his latest tweet on SVB’s collapse, the hedge fund investor said the U.S. government did the “right thing.”
“This was not a bailout in any form. The people who screwed up will bear the consequences,” wrote the CEO of Pershing Square. “Importantly, our gov’t has sent a message that depositors can trust the banking system.”
“Without this confidence, we are left with three or possibly four too-big-to-fail banks where the taxpayer is explicitly on the hook, and our national system of community and regional banks is toast,” Ackman added.
Ackman further explained that in this incident, shareholders and bondholders of the banks will be mainly the ones affected, and the losses will be absorbed by the Federal Deposit Insurance Corporation’s (FDIC) insurance fund.
This is in contrast to the great financial crisis in 2007-2008, where the U.S. government injected taxpayers’ money in the form of preferred stock into banks, and bondholders were protected.