Bill Ackman, the billionaire activist investor who heads Pershing Square Capitol, warned that America could be looking at a recession due to the Federal Reserve’s current monetary policies in the face of inflation which he described as a “big mistake. Also, combined with Treasury Secretary Janet Yellen’s declining to guarantee “blanket” protection for bank deposits, Ackman said that America is being sent to a “train wreck.”
In an extended statement that Bill Ackman posted on Twitter, he asked people to consider how recent events – the failure of several large American banks – impact the long-term cost of equity capital for “non-systemically important banks where you can wake up one day as a shareholder or bondholder and your investment instantly goes to zero.”
When combined with the higher cost of debt and deposits due to rising rates, explained Bill Ackman, there will be a negative impact on lending rates and the U.S. economy.
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“The longer this banking crisis is allowed to continue,” he said, “the greater the damage to smaller banks and their ability to access low-cost capital.”
“Trust and confidence are earned over many years, but can be wiped out in a few days,” added Bill Ackman. “I fear we are heading for another a train wreck. Hopefully, our regulators will get this right.
As for Janet Yellen’s comments on the economy, Bill Ackman was highly critical of how the Treasury Secretary first said things that made people think she was guaranteeing all banks, but then in later comments made it, “explicit that system wide deposit guarantees were not being considered.”
This, Bill Ackman feels, could cause a run on the banks saying, “I would be surprised if deposit outflows don’t accelerate effective immediately.”
Bill Ackman went on to call for a temporary system wide deposit guarantee that he said is needed to “stop the bleeding. The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.”
According to his official bio, Bill Ackman is an SEC registered investment adviser founded in 2003. Pershing Square is a concentrated research-intensive fundamental value investor in long and occasionally short investments in the public markets. Prior to forming Pershing Square, Mr. Ackman co-founded Gotham Partners Management Co., LLC, an investment adviser that managed public and private equity hedge fund portfolios. Prior to Gotham Partners, Mr. Ackman began his career in real estate investment banking at Ackman Brothers & Singer, Inc. Mr. Ackman received an MBA from the Harvard Business School and a Bachelor of Arts magna cum laude from Harvard College.