Capitalism is “collapsing” in the country: American billionaire

The US Government’s rescue package for Silicon Valley Bank (SVB) means that American capitalism is going through a bad time, said American billionaire and economist Ken Griffin.

“The US is supposed to be a capitalist economy and this is crumbling before our eyes,” the founder of one of the world’s largest market makers, Citadel Securities, told the Financial Times on Monday, a day after US regulators pledged to protect all SVB depositors, even those with balances above the $250,000 federal insurance limit.

“There has been a loss of financial discipline because the government has completely bailed out depositors,” Griffin added.

Under measures recently announced by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), depositors will have access to all of their money starting Monday, March 13. Among other things, they noted that the taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank.

Additionally, any loss from the Deposit Insurance Fund to support uninsured depositors will be recovered through a special assessment of the banks.
«A great lesson in moral hazard»

In Griffin’s view, such rescue measures destroy risk management standards and the US government should not have taken such drastic measures. “It would have been a great lesson in moral hazard,” he said, adding that “the loss to depositors would have been insignificant and would have led to the fact that risk management is important.”

On Friday, the US banking system experienced its biggest failure since the 2008 financial crisis: Silicon Valley Bank (SVB), the country’s 16th largest bank, collapsed after depositors, mostly linked to the technology sector and venture-capital-backed companies, withdrew their money, as concern about the crisis spread within the banking institution. With RT

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