Billionaire investor Bill Ackman warns more banks will fail unless the FDIC insures all deposits
Richard Drew/AP
- All US regional banks will be under threat unless regulators move to insure all deposits, according to Bill Ackman.
- "The FDIC's failure to update and expand its insurance regime has hammered more nails in the coffin," he said Wednesday.
- Both Silicon Valley Bank and First Republic failed after customers yanked their money from the struggling lenders.
The entire US regional banking sector will be at risk unless the Federal Deposit Insurance Corporation moves to guarantee all customers' deposits, Bill Ackman has warned.
"The FDIC's failure to update and expand its insurance regime has hammered more nails in the coffin," Ackman said on Twitter Wednesday.
"We are running out of time to fix this problem. How many more unnecessary bank failures do we need to watch before the FDIC, US Treasury, and our government wake up?" he added. "We need a systemwide deposit guarantee regime now."
The FDIC currently only guarantees deposits up to $250,000, meaning that customers who've parked more in their accounts don't get back amounts above that limit if their bank collapses.
Recent turmoil has fueled hundreds of billions of dollars worth of outflows from regional banks to larger institutions, as well as money-market funds.
California lender SVB collapsed in March after its disclosure of major losses on its bond portfolio sparked a bank run, while San Francisco-based First Republic was rescued by JPMorgan Monday after disclosing that customers yanked over $100 billion worth of deposits last quarter.
Ackman's comments came as PacWest became the latest institution under scrutiny as part of the ongoing turmoil.
The Beverly Hills-based bank's shares plunged 37% in premarket trading Thursday after it confirmed a report from Bloomberg that said it had started to explore a sales process.
First Republic "would not have failed if the FDIC temporarily guaranteed deposits while a new guarantee regime were created," Ackman said.
"Instead, we watch the dominoes fall at great systemic and economic cost," she added.