Billionaire investor Bill Ackman is having his say again, this time with a warning about a possible acceleration of deposit outflows from banks just as fears about the sector’s stability are easing.
In a tweet sent after Wednesday’s Federal Reserve rate decision, the hedge-fund manager singled out Treasury Secretary Janet Yellen, who said her department is not considering “blanket” deposit insurance — a comment that may have overshadowed the central bank’s signal that the end of rate hikes is near. Interest rates have now reached a level of around 5% that makes “bank deposits that much less attractive” and “I would be surprised if deposit outflows don’t accelerate effective immediately,” Ackman wrote.
Around an hour after that tweet, Ackman sent another, saying that smaller banks face greater damage the longer turmoil in the sector continues, and that he fears the U.S. is “heading for another train wreck.”
Ackman, who runs Pershing Square Capital Management, has been voicing his views more regularly on Twitter in recent years, and has shown a particular interest in how the U.S. should be responding to the fallout triggered by the collapse of three banks in roughly a week. His latest comments came even after Fed Chairman Jerome Powell told reporters that Americans should assume their deposits are safe, deposit flows have stabilized over the last week, and that the central bank “is prepared” to use its tools to protect depositors.
The billionaire is considered a savant in some circles for his early calls ahead of the 2007-2008 subprime mortgage debacle, though he’s also had his share of misses.
By now, his followers may be accustomed to the general tone of his views, which can include the occasional apocalyptical outburst.
A week ago, Ackman said that efforts by bigger banks to rescue First Republic Bank
FRC,
of San Francisco were spreading the risks of financial contagion, and called for a temporary systemwide deposit guarantee which he reiterated again on Wednesday. Earlier in the month, he suggested government intervention would be needed to help bail out California’s Silicon Valley Bank — a move that Yellen ruled out, though regulators did agree to fully protect its depositors.
On Thursday, financial markets continued to digest the implications of Wednesday’s policy moves by the Fed and Yellen’s latest comments. All three major U.S. stock indexes
DJIA,
COMP,
were higher in late-morning trading amid easing fears about bank stability. Most Treasury yields were lower, led by a declines in the 5-year rate
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