Capitalism is “collapsing before our eyes,” says prominent hedge fund manager Ken Griffin – zoohousenews.com
- March 17, 2023
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(Natural News) Ken Griffin, the founder of the Citadel hedge fund, has said the Federal Reserve’s Silicon Valley bank bailout is a clear indication that American capitalism is “crumbling before our eyes,” according to a report this week.
In an interview with the Financial Times, he argued that taxpayers didn’t need to bail out institutional investors after the Fed stepped in to prevent contagion in the US banking sector after the SVB collapse in Santa Clara.
“The US is supposed to be a capitalist economy and that’s collapsing before our eyes,” he said. “There has been a loss of financial discipline as the government has fully bailed out depositors.”
Griffin knows what he’s talking about. He is a billionaire hedge fund manager and the founder and CEO of Citadel LLC, one of the world’s largest alternative investment managers with estimated $54 billion in assets under management as of 2021.
Griffin began trading while still a student at Harvard University and founded Citadel in 1990. He is considered one of the most successful hedge fund managers in the world and is known for his philanthropic endeavors, particularly in the fields of education and the arts. In addition to his business and philanthropic activities, Griffin is also a major political donor and has been involved in numerous political campaigns and initiatives.
The SVB was shut down by US regulators on Friday after customers rushed to withdraw $42 billion, a quarter of their total deposits, in a single day. The failed attempt to raise new capital raised concerns about the future of the tech-focused lender, prompting the decision to shut it down, reports say.
On Sunday, the Federal Reserve announced a lending facility to ensure “banks are able to meet the needs of all their depositors,” officials said. Federal officials have reassured SVB and Signature Bank depositors that they are protected from loss even if their deposits exceed the normal $250,000 insurance limit.
The Federal Reserve’s decision to protect all depositors’ funds at the SVB has been criticized by some, who argue that it poses a moral hazard by isolating investors from the consequences of their decisions. There are also concerns over the possibility that regulators missed red flags that led to the bank’s collapse, the Financial Times reported.
“The regulator was the definition of sleeping at the wheel,” said Griffin, who also argued that the US economy was strong enough that the Fed didn’t need to intervene.
“It would have been a great moral hazard lesson,” he said. “Losses for depositors would have been immaterial and it would have made it clear that risk management is essential.
“We have full employment, loan losses have been minimal and bank balance sheets are the strongest they have ever been. We can address the issue of moral hazard from a position of strength,” he added.
On the other hand, Bill Ackman, another high-profile hedge fund manager, called on the Federal Deposit Insurance Corporation to “now expressly guarantee all deposits. Hours count,” saying on Twitter that “our economy will not function effectively without our community and our regional banking system.”
Griffin also explained that he and his hedge fund Pershing Square had no stake in Silicon Valley Bank and that his personal investments in the venture capital industry accounted for “less than 10 percent” of his wealth.
According to the Wall Street Journal, First Republic Bank announced on Tuesday that it has strengthened its finances by securing additional funding from the Federal Reserve and JPMorgan Chase & Co.
The outlet said the financing will help the bank to shore up its finances following the collapse of SVB Financial Corp. to base last week. The $70 billion doesn’t include money that First Republic might be able to borrow through a new Fed lending facility created to help banks process withdrawals. Remember, “the Fed” uses government money — taxpayers’ money — to operate.