Buffett says bank withdrawal would be ‘disastrous’ without deposit guarantee

Warren Buffett says there will be “catastrophic” consequences if US regulators don’t insure deposits at Silicon Valley Bank and Signature Bank, as their failure risks triggering a crisis. fled at lenders across the country.

“Although the FDIC [Federal Deposit Insurance Corporation] limit is $250,000 . . . that’s not the way the United States is going to behave any more than they’re going to go bare their debt and throw the world into chaos,” the Berkshire Hathaway chief executive told tens of thousands of shareholders gathered in downtown Omaha. the company’s annual meeting on Saturday.

The comments come after a series of banking failures in the United States that have sparked fierce debate over federal government intervention to protect deposits at both SVB and Signature Bank above the threshold. $250,000 is covered by federal insurance.

Regulators were able to get around that limit by designating both as systemic risks. While shares of regional banks have rallied in recent sessions, depositors have been somewhat appeased by tacit assurances that the government will intervene in the crisis.

“I can’t imagine anyone in the administration, Congress or the Federal Reserve. . . said I wanted to be on television tomorrow and explain to the American public why we only covered $250,000,” Buffett added. “It will start running on every bank.”

Berkshire put pressure on the state of the banking system, with Buffett saying CNBC last month that the country is not “because banks fail, but depositors are not in crisis”.

The industrial-to-insurance behemoth has previously used its balance sheet, which Buffett likens to a fortress, to invest in struggling financial institutions. Berkshire invested in both Goldman Sachs and Bank of America during the financial crisis.

However, so far it has not intervened in the current crisis. Investors have noted that Berkshire’s portfolio already has positions in several major financial institutions.

Advisor to the First Republic, which was sold this month to JPMorgan Chase in a deal negotiated by US regulators, told the FT that Berkshire’s investment in the bank was seen as an unlikely solution.

That’s due to the fast money flight that the First Republic is suffering from. Advisers believe the bank will burn through billions of dollars of capital if Berkshire’s investment isn’t enough to bolster confidence.

Buffett spent Saturday morning answering questions from shareholders regarding real estate planning, value investing, US-China relations and, more importantly, any other question gathered at CHI Medical Center in downtown Omaha, successor at Berkshire.

The 92-year-old investor confirmed that Greg Abel, the company’s vice president responsible for running all of the business outside of insurance, remains his designated successor.

“Everybody talks about the executive bench, which is silly,” he added. “We don’t have a lot of people who can run the top five GAAP net worth companies and all sorts of diverse businesses.”

Abel has been with the company for more than two decades, when Berkshire acquired MidAmerican Energy in 2000. In 2018, he was named vice president along with Ajit Jain.

Charlie Munger, Buffett’s longtime right-hand man and vice president of the company, added that there’s a reason why Berkshire outperforms other major corporations.

“We change managers less often than others, and that has worked for us,” he said.


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