SVB Rescue... US Hedge Fund King Declares "Collapse of Capitalism"

Kenneth Griffin, the billionaire hedge fund founder of Citadel and a major political donor to the U.S. Republican Party, directly criticized the Biden administration's bailout plan for Silicon Valley Bank (SVB), saying it shows the collapse of American-style capitalism.

On the 13th (local time), Griffin told British media, "The capitalist economy of the United States is collapsing before our eyes," adding, "The government’s bailout of all depositors has undermined financial discipline."

This raised questions about whether the federal government’s comprehensive policy package to prevent the SVB bankruptcy crisis from spreading throughout the U.S. financial system is yet another Wall Street bailout.

On the 12th, the U.S. Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) announced that they would protect all deposits exceeding SVB’s insured limit, covering over 90% of total deposits, focusing on preventing a chain reaction of mass withdrawals (bank runs) caused by panic.

The intention was to quickly block the fallout from the SVB collapse from spreading to other areas of the financial sector. In fact, indicators such as the New York stock market stabilized rapidly the following day, suggesting short-term effectiveness.

However, experts warn that the government’s active intervention could encourage a financial industry 'moral hazard,' potentially undermining sound market order. Regarding this, Griffin condemned it as "a classic case of regulatory negligence."

Griffin argued that even without government intervention, (financial sector liquidity) was strong enough, and this was a great opportunity to teach a significant lesson about moral hazard, but the government missed that chance.

Carson Block, founder of Muddy Waters Capital, also pointed out, "Depositors should be able to manage the investment risks of their banks themselves," adding, "Protecting deposits beyond SVB’s insured limit sent the wrong message that risk management is outdated."

Cliff Asness, co-founder of global investment management firm AQR Capital Management, wrote on his Twitter, "The government took away depositors’ chance to consider the risks of where they put their money," stating that the government should not have bailed out SVB’s depositors.

On the 13th (local time), customers lined up to withdraw deposits at the headquarters of Silicon Valley Bank (SVB) in Santa Clara, California, USA. [Image source=UPI Yonhap News]

This stance contrasts with that of Bill Ackman, chairman of Pershing Square and a U.S. hedge fund titan known as the 'Little Buffett,' who the day before welcomed "the U.S. government’s provision of a clear roadmap on how to manage failed banks."

Ackman drew a line, saying the government’s emergency measures "are not a bailout." He explained that unlike the 2008 financial crisis, when the government injected taxpayer money into banks in the form of preferred shares, this case is different.

He added, "Had the government not intervened, a 1930s-style bank run would have continued, causing massive economic damage and hardship for millions."

This content was produced with the assistance of AI translation services.