First Republic Bank rescue creates a ‘false sense of confidence,’ says hedge fund investor

BBill Ackman, an illionaire investor, criticised the recent bailout by First Republic Bank. He said that it creates a problem. “false sense of confidence.”

Pershing Square Capital Management’s CEO, Ackman, criticized the plan of 11 major US banks to invest $30 billion in FRB. He also questioned Treasury Secretary Janet Yellen’s call for Wall Street banks. “recycle” They received deposits from FRB and transferred them back into it.

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“Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy. The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be backstopped if it failed,” Ackman made the comments in a tweet, Friday.

“FRB is no SVB. It is a well-managed, well-capitalized, high-service bank with good assets that is beloved by its clients. It is caught up in a bank run due to no fault of its own. It does not deserve to fail,” He continued. “We need a temporary systemwide deposit guarantee immediately until expanded and modernized @FDICgov insurance system is made widely available.”

He also critiqued a “lack of transparency” Concerned about the deal, the warning was that the $30 billion aid package could lead to markets assuming the worst.

“I have no investments long or short in the banking sector. I am simply extremely concerned about financial contagion risk spiraling out of control and causing severe economic damage and hardship,” He stated. “We need to stop this now. We are beyond the point where the private sector can solve the problem and are in the hands of our government and regulators. Tick-tock.”

Elon Musk, Twitter’s CEO, was intrigued by the analysis and responded in kind.

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“The inefficiency of the set of heterogeneous resource allocation databases we call money is astounding,” He tweeted.

In an attempt to avoid a bigger collapse following the collapse of Silicon Valley Bank, the government announced a $30 billion rescue plan. Despite recovering from the day before on Friday, the bank’s stock continued its slide.