And you thought there were rules against yelling "fire!" in a crowded theater.
Ken Griffin, founder of the hedge fund Citadel, says the U.S. Federal Reserve's decision to protect the deposits at Silicon Valley Bank past the $250,000 per account that the FDIC already insures is the beginning of the end.
DON'T MISS: Silicon Valley Bank Collapse: Large Account Holders Are Unsecured Depositors
"The US is supposed to be a capitalist economy, and that’s breaking down before our eyes," Griffin told the Financial Times this week. "There’s been a loss of financial discipline with the government bailing out depositors in full."
The majority of account holders at SVB, which on Friday was shut down by regulators and taken over by the FDIC, had balances that exceed $250,000.
The FDIC said in a statement on Friday that it will "pay uninsured depositors an advance dividend within the next week.
"Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds," the agency said. "As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors."
This type of bailout pretty much amounts to socialism in Griffin's eyes. Capitalism on the other hand teaches its participants tough lessons in accountability.
"It would have been a great lesson in moral hazard," Griffen said. "Losses to depositors would have been immaterial, and it would have driven home the point that risk management is essential."
"We're at full employment, credit losses have been minimal, and bank balance sheets are at their strongest ever. We can address the issue of moral hazard from a position of strength.
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