Bill Ackman Calls For Government Bailout Of Silicon Valley Bank 'To Protect Depositors'

Billionaire hedge fund manager Bill Ackman, head of Pershing Square Capital Management, said on Friday the government should step in to bail Silicon Valley Bank in the interest of depositors after the SVB Financial Group SIVB-owned financial institution was taken over by the FDIC.

The fall of SVB is the latest hit to the banking sector, where rising interest rates have become much more than a pebble in the shoe.

"If private capital can't provide a solution, a highly dilutive gov't preferred bailout should be considered," Ackman wrote on Twitter.

A way to do this is for the federal government to "guarantee deposits in exchange for a dilutive warrant issuance and other covenants and protections,” he said.

"If [Silicon Valley Bank] is indeed solvent, this would buy time to enable SVB to restore the franchise and raise new private capital," he wrote.

The fund manager clarified that such a bailout should be designed to protect depositors, not equity holders or management. 

"We should not reward poor risk management or protect shareholders from risks they knowingly assumed," he said.

“The risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why gov't intervention should be considered.”

SVB is important to the startup sector, Ackman said, adding that the bank’s failure "could destroy an important long-term driver of the economy."

VC-backed companies rely on the bank for loans and holding their operating cash, he wrote.

Shutterstock image, edited by Benzinga.