FRC - Bill Ackman flags contagion risks from $30B rescue deal for First Republic

2023-03-17 08:34:35 ET

Billionaire investor Bill Ackman flagged financial contagion risks from the $30B deposit lifeline extended by major banks to First Republic Bank ( NYSE: FRC ), saying a temporary systemwide deposit guarantee is needed immediately.

Eleven big banks agreed to deposit ~$30B with the troubled lender, which initially pushed its stock higher. But shares reversed course after First Republic ( FRC ) said it will suspend its dividend .

Ackman called the deal with the big banks a "fictional" vote of confidence. "First Republic ( FRC ) default risk is now being spread to our largest banks," he tweeted . "Spreading the risk of financial contagion to achieve a false sense of confidence in FRC is bad policy."

Ackman said the bigger banks would've never made this low return investment in deposits "unless they were pressured to do so and without assurances that FRC deposits would be backstopped if it failed."

He stressed that First Republic ( FRC ) is no Silicon Valley Bank ( SIVB ) as it is well managed and capitalized. "It is caught up in a bank run due to no fault of its own. It does not deserve to fail."

"I have no investments long or short in the banking sector. I am simply extremely concerned about financial contagion risk spiraling out of control," he concluded.

More on the bank crisis

SVB Financial initiates Chapter 11 proceeding

Bill Ackman says more banks will fail

First Republic Bank: 4 Reasons To Buy

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