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| Billionaire Bill Ackman warns of U.S. banking crisis: "We are heading for a train wreck" |
Billionaire investor Bill Ackman, CEO and portfolio manager of Pershing Square Capital Management, has raised concerns that the US economy is headed for a "train wreck" if the ongoing banking crisis is not resolved. Ackman's comments come after several major banks, including Silicon Valley Bank and Signature Bank, have experienced significant failures, raising concerns about the stability of the financial sector.
The hedge fund management company, which has around $18.5 billion in assets under management, was among the first to draw attention to the crisis. Ackman tweeted on Wednesday that the long-term cost of equity capital for non-systemically important banks could rise significantly, resulting in sudden losses for investors.
Ackman warned that the situation could lead to a banking crisis and hurt smaller banks' ability to access low-cost capital. He called for the government to guarantee all bank deposits to restore confidence in the banking system.
While Treasury Secretary Janet Yellen initially suggested that all deposits were implicitly guaranteed, she later walked back on this statement, with the Federal Reserve raising the federal funds rate to 4.75%-5.00%. Ackman believes that a temporary system-wide deposit guarantee is necessary to stem the outflow of deposits from smaller banks.
If the crisis is allowed to continue, it could harm trust and confidence in the banking system, which takes years to build and only days to destroy. Therefore, regulators must act quickly to restore stability and confidence in the banking sector to avoid a financial "train wreck" that could cause long-lasting damage to the US economy.
