Here Are The Banks Facing The Highest Deposit-Run Risk
Earlier today, hedge fund manager Bill Ackman tweeted something (very long) which despite being traditionally self-serving (who can forget Ackman's "hell is coming" tearful CNBC appearance which meant to spark panic, chaos and more selling... not to mention a $2BN payout to Ackman), was also correct:
Absent JPMorgan, Citi or Bank of America acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions.
While we generally disagree with most things Ackman says, his point here is spot on as we explained on Thursday before the sudden and shocking failure of Silicon Valley Bank.