- Cratering Silicon Valley Bank’s troubles could be the first sign of a new financial crisis.
- Debate is surrounding the US banking system amid contagion fears from the fallout.
- Here’s what Bill Ackman, Michael Burry, Mohamed El-Erian and other top voices had to say.
SVB Financial’s stock crashed 60% on Thursday, sending shockwaves through the stocks of America’s biggest banks as investors feared potential contagion effects in the banking sector from the fallout.
The California-based bank’s share price collapsed after it announced its plans to sell off more shares to cover a $1.8 billion loss it faced after completing a $21 billion fire sale of its bond portfolio.
But not everyone sees eye-to-eye on what SVB’s troubles could mean. While some say the US banking system is solid, others think this could be the first sign of a new financial crisis.
Here’s what some of Wall Street’s biggest names have to say.
‘Big Short’ investor Michael Burry
Billionaire investor Bill Ackman
“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,” the billionaire investor said in a Twitter thread.
Top Economist Mohamed El-Erian
“Only two days ago it was hard to think of something that could share the headlines today with the US jobs report. Well, and highlighting the current economic/financial/policy fluidity, we have something: banking system worries,” El-Erian said on Twitter.
“Lots of chatter today about the possibility of generalized US banking system stress due to #SVB troubles.Three summary things on this: While the US #banking system as a whole is solid, and it is, that does not mean that every bank is,” El-Erian he also said in an earlier tweet.
“Due to the volatility in yields after the prior protracted period of leverage-enabling policy, the most vulnerable currently are those vulnerable to both interest rate and credit risk. Contagion risk and the systemic threat can be easily contained by careful balance sheet management and avoiding more policy mistakes,” he added.
Scott Melker, Wolf of All Streets podcast host
“Silvergate Bank going under is bad. Silicon Valley Bank going under would be exponentially worse. Let’s hope that doesn’t happen,” Melker tweeted.
“They bank a huge swath of the tech industry and large VCs. Extinction level event,” he added.
Activist Investor Ryan Cohen
“Does this mean I don’t have to pay back Silicon Valley Bank?” Cohen, who is also the chair of Gamestop, tweeted.