Buffett faults US government handling of banking crisis
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Mr Warren Buffett said what happened with Silicon Valley Bank was a government takeover completed with expanded deposit guarantee.
PHOTO: REUTERS
NEW YORK – Investment tycoon Warren Buffett said on Saturday that messaging from the United States government over the regional banking crisis had been “poor”, suggesting that is why confidence has not returned among consumers.
Four regional banks have been caught up in crisis since the beginning of March in the US, three of them subsequently taken over by other institutions with the help of authorities.
For two of them – Silicon Valley Bank (SVB) and Signature Bank – the Federal Deposit Insurance Corporation (FDIC) took the controversial decision to support their uninsured deposits, citing fears of contagion.
By law, the FDIC insures up to US$250,000 (S$330,000) of customers’ deposits in eligible banks, but for SVB and Signature, it insured all deposits, including those above the legal limit.
Yet, despite that extraordinary step, consumers are still worried, Mr Buffett said at a shareholder meeting of his Berkshire Hathaway holding company.
“That just shouldn’t happen. The messaging has been very poor,” said the billionaire, who continues to run his group at 92.
“It’s been poor by the politicians who sometimes have an interest in having it poor, it’s been poor by the agencies. And I’d say it’s been poor by the press.”
What happened with SVB
While the emergency takeover of regional bank First Republic by giant JPMorgan Chase on Monday seemed likely to ease anxiety about the banks, it has been a turbulent week.
Several mid-sized banks were targeted on Wall Street, in particular PacWest, which fell 68 per cent before recovering 82 per cent in Friday’s session alone.
On Saturday, Berkshire Hathaway reported a monster US$35.5 billion profit for the first quarter alone, largely due to strong financial markets.
In the first three months of 2023, the group sold US$13.2 billion worth of equities from its investment portfolio, while buying only US$2.8 billion, drastically reducing its exposure to stocks.
Mr Buffett transformed Berkshire Hathaway from a small textile company bought in the mid-1960s into a conglomerate now valued at more than US$700 billion. AFP
