Pershing Square’s Bill Ackman said he expects an acceleration of deposit outflows from banks after US Treasury Secretary Janet Yellen “walked back” comments about guaranteeing all deposits and the Federal Reserve raised its benchmark rate.
“We have gone from implicit support for depositors to @SecYellen explicit statement today that no guarantee is being considered with rates now being raised to 5%,” Ackman said in a long Twitter post. The 5% rate threshold makes bank deposits “much less attractive,” he wrote. “I would be surprised if deposit outflows don’t accelerate immediately,” Ackman added.
“A temporary system-wide deposit guarantee is needed to stop the bleeding,” he wrote. “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.”
Earlier in the day, Ackman said in another tweet that Yellen’s statement on the Treasury not considering an expansion of deposit insurance was a “big mistake.” He added that Yellen’s remarks in addition with the Federal Reserve’s 25 basis-point hike “puts even more pressure on” non-systemically important banks.
On Tuesday, Ackman said Yellen’s comments on the federal government’s involvement in the banking system could potentially mitigate the need for a temporary deposit guarantee. The day before, he said the Fed should pause its interest-rate moves this week in light of the banking crisis. Ackman said earlier this month he has no long or short investments in the banking sector.