Continued interest rate hikes by the Fed could worsen the banking turmoil, according to Bill Ackman.
The US economy is facing disaster following another interest rate increase by the Federal Reserve and the Treasury’s rejection of full deposit insurance, billionaire investor Bill Ackman has warned.
“When combined with the higher cost of debt and deposits due to rising rates, consider what the impact will be on lending rates and our economy,” Ackman wrote on Twitter on Wednesday. “The longer this banking crisis is allowed to continue, the greater the damage to smaller banks and their ability to access low-cost capital,” he added.
The billionaire’s warning follows the US central bank’s decision to raise rates by 25 basis points. On Wednesday, the Fed lifted its benchmark rate to a 4.75%-5% range as it continues to combat inflation.
“Trust and confidence are earned over many years, but can be wiped out in a few days. I fear we are heading for another train wreck. Hopefully, our regulators will get this right,” he said.
Ackman also slammed US Secretary of the Treasury Janet Yellen for walking back plans to support depositors.
Yellen, who previously made assuring comments about protecting regional banks, stated on Wednesday that she had not considered or discussed “blanket insurance” for US banking deposits without the approval of Congress as a way of stemming the threat of further bank runs.
“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,” Ackman argued.
Western governments and central banks have sought to prevent a cascade of bank failures after the sudden collapses earlier this month of Silicon Valley Bank and Signature Bank in the US. The turmoil has also hit troubled Swiss banking giant Credit Suisse, which has been acquired by its rival UBS in a government-brokered deal aimed at shoring up public confidence in the Western financial system and averting a global crisis.