December 9, 2023

Warren Buffett says the recent turmoil in the US banking industry, triggered by the collapse of Silicon Valley Bank and other institutions, has caused unnecessary panic among depositors, who he says are protected by the Federal Deposit Insurance Corporation.

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But the impact on investors may be another story.

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“We’re not done with bank failures, but savers haven’t had a crisis,” Berkshire Hathaway’s chairman and CEO told CNBC on Wednesday. “Banks are going bust. But depositors will not suffer.”

“No one is going to lose money on a deposit in an American bank. It won’t happen,” the billionaire investor said. “You don’t have to turn a stupid management decision into a panic for the entire population of the United States about something they don’t need to panic about.”

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The SVB collapsed last month after a liquidity crunch blamed on poor asset management by critics for sparking a full-blown bank run.

SVB was unique in that it catered primarily to the venture capital community and had a high percentage of deposits that were not insured by the FDIC, so federal regulators lashed out with a plan to ensure all savers were bailed out.

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But the collapse of the SVB and several other institutions in recent weeks has raised contagion fears amid fears that more banks will collapse due to the same mistakes.

Warren Buffett

Buffett, known as the “Oracle of Omaha,” confirmed that his company sold shares in several banks after noticing warning flags in their income statements, but did not name names. He went on to acknowledge that he kept his holdings in Bank of America, saying he “extremely likes” CEO Brian Moynihan.

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“But I sold the banks we owned for 25 or 30 years,” Buffett admitted. “I just don’t think the system is entirely right in terms of tying punishment to the guilty.”