Shark Tank star Kevin O’Leary bashed the federal bailout of Silicon Valley Bank depositors.
O’Leary explained his critiques on Fox Business’s Cavuto: Coast to Coast with host Neil Cavuto on Tuesdsay. Silicon Valley Bank (SVB) is one of several banks that collapsed last week. O’Leary accused regulators of taking an “isolated incident” and creating a “moral hazard” by applying it as an overall banking concern, guaranteeing deposits above the $250,000 Federal Deposit Insurance Corp. limit. He said when the next bank fails, the federal government should just “let it fail.” O’Leary would later state during a segment hours later on the Fox News Channel's Hannity that SVB was “run by idiots.”
O’Leary told Cavuto he predicted “unintended consequences” from the bailout policy, such as signaling to banks that the Federal Reserve will rescue them no matter what.
“Going forward, I think a lot of bank managers are going to say, ‘Wait a second, I have no risk. I'm going to go crazy like those guys did at the Silicon Valley Bank and do stupid leverage things,” O’Leary insisted. “Because if anything goes wrong, as long as I stay within the baseball rules of banking, nothing can happen to me because the Fed covers all my depositors. I don't have to worry if I'm crazy.’ That's the problem we've got.”
“There's going to be problems ahead here because, frankly, I don't think just guaranteeing deposits is enough to keep everybody with all of their money in just the regional bank,” O’Leary said. “Even in our own portfolio, we have now moved our assets across five different financial institutions.” He predicted “all kinds of new regulations” for the regional bank system.
The U.S. Department of Justice and the Securities Exchange Commission just announced a formal investigation into SVB’s insolvency, Fox said.
“If we had just let that collapse before we got into panic, we would have had a much better situation. We would have said: okay, 95% of these assets were covered, no problem. And so 5% for people that had more than $250,000 per account is something the bank could have absorbed,” O’Leary explained.
SVB is no longer salvageable as a brand, O’Leary added. “The franchise value of the words ‘Silicon Valley Bank’ has been trashed. It's no better than radioactive waste,” he told Cavuto. “We should have let them fail, and not panic and not change policy for the entire banking system.”
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