We are running out of time to fix this problem. How many more unnecessary bank failures do we need to watch before the FDIC, the U.S. Treasury, and our government wake up? We need a system-wide deposit guarantee regime now.
That was hedge fund billionaire Bill Ackman back with his two cents on the regional banking system following the collapse of First Republic Bank and subsequent takeover by JPMorgan & Chase Co
JPM,
earlier in the week. On Wednesday night, fellow regional lender PacWest Bancorp’s shares
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plummeted after a report it was considering strategic options.
The Pershing Square Capital Management CEO said in a long tweet early Thursday that First Republic Bank would not have failed if the Federal Deposit Insurance Corporation temporarily guaranteed deposits while the sector waits for a new guarantee regime to be created.
“Instead, we watch the dominoes fall at great systemic and economic cost,” he said.
“At this rate, no regional bank can survive bad news or bad data as a stock price plunge inevitably follows, insured and uninsured deposits are withdrawn and ‘pursuing strategic alternatives’ means an FDIC shutdown over the coming weekend,” he added. “And there is no incentive to bid until Sunday after the failure.”
Ackman, who has previously called for a system-wide deposit guarantee system in the wake of the collapse of Silicon Valley Bank , said that uninsured depositors of regional banks are more at risk than global systematically important banks (GSIBs), which have an “unfair competitive advantage” being too big to fail and there their uninsured depositors can sleep soundly.
In late March, Ackman tweeted about a possible acceleration of deposit outflows from banks. He singled out Treasury Secretary Janet Yellen for indicating that her department is not considering “blanket” deposit insurance.
Yellen and the FDIC are considering an either an “explicit or de facto” guarantee of deposits above the $250k limit, according to FOX Business Network senior correspondent Charles Gasparino.
