Kofi Mensah Billionaire Bill Ackman is really worried for us because he thinks the US economy might go downhill if steps aren’t taken fast to stop the banking crisis. He said that it takes a long time to regain lost trust but it can all be gone in just a few days! He hopes that decision-makers will do the right thing and act quickly.
Billionaire Bill Ackman
Billionaire Bill Ackman is the CEO of a big company called Pershing Square Capital Management. The company has a lot of money, which is called “assets under management” and its worth is around $18.5 billion. Mr. Ackman’s personal wealth or net worth is estimated to be $3.4 billion.
Mr. Ackman recently made an alarming statement about the current financial crisis in banks like Silicon Valley Bank and Signature Bank. He said it was going to be a train wreck!
Recently, non-systemically important banks have seen their long-term cost of equity capital go down to zero unexpectedly overnight – meaning that their shareholders and bondholders can find themselves with zero investments.
Systemically important banks (SIBs) are really big and complex banks that can cause a lot of damage if they go through a bad time or fail. On the 2022 Financial Stability Board’s list of SIBs, some of the major names include JPMorgan Chase, Bank of America, Citigroup, HSBC, and Credit Suisse.
“Recently, the cost of debt and deposits has gone up so that means lending rates might too. If this banking crisis is left to continue, smaller banks may have difficulty getting funds at lower costs in the future. This can lead to bigger problems so it’s important that we act now before bad things happen.”
The billionaire thinks the government should make sure all money in banks is safe. On March 22, he posted on Twitter and said that Janet Yellen’s encouraging words made it seem like everyone’s deposits were backed up by the government. He also mentioned a rumor which said that Yellen, the Treasury Department, and the Federal Deposit Insurance Corporation wanted to make sure all bank money was secure. This gave confidence to people who had their money in banks.
Today Yellen said that large banks will not be given any extra protection. This means that small banks and the people who have money deposited in them do not get special privileges and will not be guaranteed to never lose their money.
“Before, the government didn’t really guarantee deposits but now Secretary Yellen said that they still won’t be guaranteeing it. This made bank deposits less attractive and I think people will start taking out their money more,” explained Ackman. He went on to say that the Federal Reserve had increased the rate of interest to 4.75%-5.00%. This 5% threshold makes saving in banks not as appealing.
Bill Ackman thinks it is important to create a plan that will protect small banks from any damage which has been caused by the uncertainty of the present situation. He believes that the longer this uncertainty continues, the more difficult it would be for people who rely on these banks to come back and use their services again.
Do you agree with what Bill Ackman is suggesting? Please tell us in the comments section below!
