Bill Ackman, American billionaire investor and hedge fund manager and the founder and CEO of Pershing Square Capital Management, Tweeted this:
https://twitter.com/BillAckman/status/1635109889302315008
This was not a bailout. During the GFC, the gov’t injected taxpayer money in the form of preferred stock into banks. Bondholders were protected and shareholders were diluted to varying degrees. Taxpayer money was put at great risk. Many people who screwed up suffered minimal to no consequences. Those were bailouts.
Here, shareholders and bond holders have been wiped out. The
@FDICgov
insurance fund capitalized by premiums paid by banks will absorb any losses. The fund will recoup any losses by assessing more premiums on the banks.
Had the
@FDICgov
@USTreasury
and
@federalreserve
not intervened today, we would have had a 1930s bank run continuing first thing Monday causing enormous economic damage and hardship to millions.
More banks will likely fail despite the intervention, but we now have a clear roadmap for how the gov’t will manage them.
Bank boards and managements have received a massive wake up call. Being a director or CEO of a bank that fails is no fun: years of litigation, regulatory investigations, personal liability, potential civil and criminal charges, and enormous reputational damage.
Our gov’t did the right thing. This was not a bailout in any form. The people who screwed up will bear the consequences. The investors who didn’t adequately oversee their banks will be zeroed out and the bondholders will suffer a similar fate.
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.
Our government did the right thing for the country. We are very fortunate it did so.
(1930s bank run)
1929?
Bailouts are back !!!
Feds bail out tech bros
Federal authorities bailed out depositors in Silicon Valley Bank (NASDAQ:SIVB) and Signature Bank (NASDAQ:SBNY), aiming to head off a run on the country’s second-tier regional banks.
The Federal Reserve, Federal Deposit Insurance Corporation and the Treasury said they will make sure the two banks honor all of their deposits, the vast majority of which are above the $250,000 federally-insured threshold.
They also set up a new instrument, named the Bank Term Funding Plan (BTFP), which will allow banks to sell Treasury bonds and other high-quality liquid assets to the Fed at par if they need to raise liquidity. The program will be back-stopped by $25B of taxpayers’ money.
The move means that the banks’ clients, many of them venture capitalists and crypto platforms, will not have to carry the can for what appears to have been startlingly elementary risk management failures at the two banks.
So who will pay the price for losses at the banks?
Where did govt get the money to do anything?
You got it. It is always taxpayers at end of day
That fugly national debt is liability for future taxpayers.
Government does not produce anything to sell in the economy and make profits. Govt has only 2 sources for funds
1. Taxes
2. Borrow by printing