Billionaire investor Bill Ackman stressed that the U.S. government’s protection of Silicon Valley Bank is “not a bailout” and ensures “depositors can trust the banking system,” CNBC reports.

“This was not a bailout in any form,” the CEO of hedge fund Pershing Square Capital Management said. “The people who screwed up will bear the consequences,” Ackman tweeted.

The U.S. government did the “right thing,” Ackman said.

“Without this confidence, we are left with three or possibly four too-big-to-fail banks where the taxpayer is explicitly on the hook, and our national system of community and regional banks is toast,” Ackman added.

Shareholders and bondholders of banks that fail will mostly be the ones affected, with the Federal Deposit Insurance Corp. (FDIC) insurance fund absorbing most of the losses, Ackman said.

By comparison, in the banking crisis of 2008, taxpayer money in the form of preferred stock was used to shore up banks, while protecting bondholders.

Over the weekend, however, Ackman warned of a bank and economic meltdown if the government did not bail out Silicon Valley Bank by making its uninsured depositors whole.

The billionaire tweeted: "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. 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)."

Confidence in US Banking

Others agreed with Ackman’s earlier statement, warning that consumer confidence in the U.S. banking system is at stake.

“I don’t think that you can understate the danger that the American banking system is in,” bank analyst Dick Bove said on CNBC “Squawk Box Asia” Monday.

“Right at this moment, I don’t think you would expect to see the Treasury Secretary, the head of the Fed and the head of the FDIC making a public joint statement—unless they understood clearly the risk that the banking system and the American in America is facing right now.”

Bove pointed to two reasons the U.S. banking system is at risk.

“Number one, the depositors have lost faith in American banks,” Bove said. “Forget the people who may or may not have been taking money out of SVB. Deposits in American banks have dropped 6% in the last 12 months.

“The second group that has lost faith in the American banking system are investors,” Bove continued. “The investors have lost faith because the American banks have a whole bunch of accounting tricks that they can play, to show earnings when earnings don’t exist, to show capital when capital doesn’t exist.”

From Regional to Larger Banks

Ackman also warned of consumers moving money out of regional banks to larger banks:

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

Then there are those who warn that if the government shields uninsured deposits in banks for venture capitalists and investment banking, depositors could chase riskier assets.

One such individual is Peter Schiff, chief economist and global strategist for Euro Pacific Capital, who says, “The bailout [of SVB] means depositors will put their money in the riskiest banks and get paid higher interest, as there’s no downside risk.”

The net result, Schiff said, is “all banks will take on greater risks to pay higher rates. So in the long run, many more banks will fail, with far greater long-term costs.”