Buffett faults US government handling of banking crisis
NEW YORK
Investment tycoon Warren Buffett has said that messaging from the U.S. 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 United States, 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 $250,000 of customers’ deposits in eligible banks, but for SVB and Signature the body insured all deposits, including those above the legal limit.
Yet, despite that extraordinary step, consumers are still worried, 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 the age of 92.
What happened with SVB demonstrated a government takeover completed with an expanded deposit guarantee, “and the public is still confused,” he said.
While the emergency takeover of regional bank First Republic by the 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 percent before recovering 82 percent in session alone on May 5.
