“Big Short” investor Danny Moses said the Silicon Valley Bank collapse is exacerbating the economic slowdown despite the government’s actions to mitigate the impact. “You can’t assume that the regulators have any idea what they’re actually dealing with now considering that they were completely caught off guard… by what just happened at Silicon Valley Bank,” the Moses Ventures founder told CNBC’s ” Fast Money ” on Tuesday. “That should make people nervous.” Moses, who is known for successfully betting against the housing market before its 2008 implosion, speculates failures are just starting. “There’s been a credit dynamic in place since the Fed started raising rates. We’re just now getting the lagged impact,” said Moses. “Ninety-nine percent of people did not see this coming. So, now it’s the all clear? I don’t think so.” Yet, the broader markets closed higher on Tuesday. Moses characterized the move as a knee-jerk reaction to the idea the Federal Reserve will pause interest rate hikes ahead of schedule. He said the strength won’t hold because the cost of capital is rising. Plus, he cautioned there are still ominous issues on bank balance sheets from commercial real estate and auto loans. “If you believe it’s [the economy] going to slow down, it just accelerated that slowdown because banks have to really to pull back in their activities,” said Moses. He expects first-quarter earnings season, which starts next month, will give Wall Street more clarity. ‘Fed is kidding themselves’ “The Fed is kidding themselves if they think this situation is just going to go away,” Moses said. “This [SVB] was a small vase sitting on the window,” he added. This week, Moody’s Investors Service downgraded the U.S. banking system to negative from stable . The move came after regulators and the Treasury Department stepped in to ease solvency jitters associated with the failures of SVB and Signature Bank . “We still have underestimated in this market in general what is happening when you raise rates,” Moses said, referring to the central bank’s move to hike interest rates by 450 basis points since March 2022. “We’ll see what the Fed does next week.” The Federal Open Market Committee holds its two-day policy meeting on interest rates next Tuesday and Wednesday. Disclaimer