At the Berkshire Hathaway annual general meeting, Warren Buffett criticized the poor handling of the banking crisis. He swore his followers to difficult times.
Major investor Warren Buffett saw the problems in the US banking landscape coming. That’s why he started reducing his shareholdings in financial institutions months ago.
The American explained this to a good 40,000 visitors who traveled to Omaha, Nebraska, where Buffett is based, for the Berkshire Hathaway Annual General Meeting on Saturday.
Most notably, there has been poor communication from politicians, government agencies and the media regarding state-insured deposits and distorted incentives, which Buffett said banking regulation has created.
A crisis of confidence in the US banking sector has caused three mid-sized banks to collapse since March as depositors fled smaller banks and the Federal Deposit Insurance Corp (FDIC) was asked to increase its $250,000 deposit guarantee.
According to the FDIC, 89 percent of the collapsing $175 billion Silicon Valley bank was uninsured at the end of 2022. However, following a decision by the authorities, depositors whose accounts exceeded $250,000 were protected by a systemic risk waiver designed to prevent a broader contagion to the US banking system.
Stable local bank
Berkshire holds about $128 billion in cash and Treasury bills, Buffett said. The holding company has sold some bank stocks in the last six months. After, according to the “Oracle of Omaha”, some bank stocks had already been sold when the pandemic broke out, only Bank of America is currently in the portfolio.
The sixth richest person in the world said he was not personally worried about local banks. Nevertheless, in view of the high interest rates and the increasing risk of recession, he swore his followers to expect difficult times.