Billionaire hedge-fund manager predicts ‘economic meltdown’ following Silicon Valley Bank collapse

According to the 56-year-old founder and CEO of Pershing Square Capital Management, people will be rushing to withdraw cash from their banks on Monday unless the government guarantees their currently uninsured funds and "fix a-soon-to-be-irreversible mistake."

The Federal Deposit Insurance Corporation (FDIC) set the standard insurance amount to $250,000 per depositor, per insured bank, for each account ownership category. In the case of SVB, an institution known for being used by several tech ventures that deposited millions of dollars with the bank, there are several companies now in turmoil due to the vast amounts of uninsured cash they had before the collapse.

"The gov't has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank," Ackman wrote on Twitter on Saturday.

He continued in the 649-word extra-long tweet, "Absent @jpmorgan @citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov't guaranteeing all of SVB's deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the 'systemically important banks' (SIBs)."

The downfall of SVB makes it the largest bank failure since the collapse of Washington Mutual during the 2008 financial crisis.

As the New York Post reports, the FDIC was reportedly searching to find a bank that would be willing to merge with SVB over the weekend. According to Bloomberg, the feds are considering creating a fund that would enable regulators to reinforce customer deposits if other banks fold.

If the government doesn't take drastic action, Ackman says that people who are no longer confident in the banking system will withdraw from their accounts en masse.

"These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions," he said, noting that the "increased demand for short-term UST will drive short rates lower, complicating the @federalreserve's efforts to raise rates to slow the economy."

According to the billionaire, who has a net worth that Forbes values at $3.4 billion, it is "unlikely any buyer will emerge to acquire the failed bank," and "thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week."

"The FDIC's and OCC’s [Office of the Comptroller of Currency] failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation's highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks' access to low-cost deposits," Ackman argued.

He concluded his dire warning with "the unintended consequences of the gov't's failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday."