Buffett votes no confidence in banking system
September 10, 2008 – 7:47 amTwo weeks ago, during the live talkback at the I.O.U.S.A. premiere, Warren Buffett played Pollyanna, waxing enthusiastic about the prospects for the American economy.
His latest biz decision doesn’t match his public rhetoric. From today’s Journal:
Warren Buffett’s Berkshire Hathaway Inc. has told one of its subsidiaries—(Kansas Bankers Surety)—to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers.
Commercial banks seeking to attract large deposits over federally-insured limits would purchase their own insurance protection to give wealthy customers peace of mind: “don’t worry about the $100,000 deposit insurance limit per account. We have additional coverage via our own insurer.”
But much of the banking system is on the brink, saddled with hundreds of billions of toxic loan assets sitting on its collective balance sheet. Buffett appears to think it’s no longer a good idea to be insuring ‘em.
The precarious position of commercial banking also puts the FDIC at risk. As I wrote two weeks ago, with $45 billion in its insurance fund, and the prospect that WaMu—with $140 billion of insured deposits—could fail, it seems inevitable that FDIC will run out of money.
Requiring yet another bailout.
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14 Responses to “Buffett votes no confidence in banking system”
Lets see how Mcain and carribou Barbie can spin all of the trouble facing this rotten financial system full of corruption and complicity so they can blame the democrats. We are in sad shape if you are frugal and save your money the government will be happy to give it away to their rich friends in the financial markets. WE ARE FREAKIN DOOMED!!!!!
By polyanna on Sep 10, 2008
Neither candidate will be able to correct this.
If the Fed goes belly up we all do.
The more we taxpayers bail out the casino’s (wall street corps)
1..The less our buck will be worth and then the powers that want the Amero will say that by incorporating our country with Canada and Mexico will increase the value of what we hold in cash. meaning they will give you 2 Amero’s for one buck. Then I think Americans will be happy to accept the Amero.
2.. we the People say no to Wall Streets illegal goings on and install a new government that will not put the People into unconstitutional dept. Then we need to reissue the Constitution as it was before 9-11.
3.. If they get away with #1 and we all don’t do something we will let the new Nationalist Socialist Party take full control.
By Sharky on Sep 10, 2008
Here is my question? I thought Buffett has a large stake in Wells Fargo. If he thinks that the banking system is so bad, why does he still have his stake in Wells?
By meagherrob on Sep 10, 2008
A fair point meagherrob. Perhaps my characterization of Buffett’s move is unnecessarily superlative. Although I’m not sure I’d pay much attention to Buffett’s legacy stock portfolio; he hasn’t sold any of his major holdings in years that I’m aware of even though the fundamentals are crap for many of them.
Moody’s, Wells Fargo, Washington Post, Coke. Those are just off the top of my head, but take a gander at the long term stock charts. They’re all off 40-60% from their all-time highs.
I’m not arguing that Buffett is a bad investor. He certainly knows value. My suspicion is that he can’t sell these stocks because he’s held them so long and his cost basis is so low. The tax hit would be enormous.
That said, it puzzles me that a guy like him (who’s timing on PetroChina was phenomenal) wouldn’t recognize that stocks like WFC, MCO, KO, and WPO got too expensive a long time ago. Losing 20% to cap gains taxes is better than losing 50% in the market.
I guess I’m not sure what to make of The Oracle of Omaha sometimes. On the one hand he notes that the stock market can’t grow like it has over the last century. At an 8% compound annual growth rate, the Dow would be over 500,000 in 50 years. At the same time he goes on about America’s unlimited potential.
In any case, the KBS move is clearly a sign of pessimism regarding the banking system. And why sell WFC now? Though I wouldn’t want to own it, there’s a case to be made that it’s a more decent value now than it was…..
By RolfeWinkler on Sep 10, 2008
Buffet certainly has the background to discuss banking, drug money laudering, and the New World Order, etc. He’s been in the middle of all of that. For example; he basically owns Coca Cola and their offices are used as CIA safe houses around the world. And he is considered a genious at drug money laundering FOR the CIA and others! So he certainly knows but does he tell? Seems to me as a top Illuminotti dog he’s set to profit from the crash of everything we have access to but those rules don’t apply to Mr Buffit.
By Bob on Sep 10, 2008
eh Sharky above,
Im in Canada, do you really think we would be stupid enough to join your country in a financial menage with mexico? THINK serious. There is NO way. your day in dollar heaven is done. Again i see it over and over, me me me america, your on your own.
By CANPOINDEX on Sep 10, 2008
Wake up CANPOINDEX!!! You think “you the people of Canada have any more say then us in the states of weather or not the will merge us (or rather when) We are headed for 5-7 unions Europe, North American, African, Asian, pan Asian, south American) than one world order weather we like it or not. It looks like we are next. and it is not me me me. It is THEM THEM THEM. the master planers (Illuminati) and WE WE WE the shepeople. Soon the truth will become self evident. It is time we all start to think SERIOUS and stop living in denial!!!
By Curt on Sep 10, 2008
Well said Curt.
By Joe on Sep 10, 2008
Why isn’t this crisis being used as an opportunity for the government to embark on much needed banking reform? I see this as just more of the same, Federal Reserve creating money from thin air, giving it to the Treasury in return for Treasury Bonds to buy the garbage stewing at Fan and Fred in return for Preferred Stock and Warrents of Fran and Fred. Sticking the citizens of the US with the Treasury debt owned by the Fed. If Dodd as Senate Banking Chairman or Frank as Senate Finance Committee Chairman had any fresh ideas and a little bit of spinal column, they would be requesting that congress creates the financing directly and the Federal Reserve Bank be thrown under the bus along with the repeal of the Glass Stegall Act. The Federal Reserve Bank should be giving congress bonds for dollars created by congress when the banking system needs injections of capital. Bank issued bonds owned by Treasury as an asset of the people in exchange for congress created dollars. What we have now are dollars created by a private central bank borrowed by congress in exchange for Treasury Bonds as a liability of the people. This is debt slavery and not the freedom that we all believe in, fight for and stand for. What’s the matter with our leaders, don’t they get it?
By Tom on Sep 10, 2008
This type of crisis has happened several times in the past 250 years - all caused by the incredible greed of the banks. Each time the only fix was to remonetize the system using gold. This time is more complicated. The “FED” tricked the US Gov’t. into allowing it to control the money supply. The “FED” is no such thing of course. It is a collection of the most powerful banks and their attempts, again, to steal the wealth of the nations they supposedly serve.
The FED, because it controls the money supply has just been given extraordinary powers by BUSH to save the system. Considering they were the ones to blame for the derivatives / hedge bubbles along with the sub-prime tragedy (for the little guys anyway) it is like putting the prime murder suspect in charge of the investigation.
The banks will do ANYTHING at this point in time to guaranty that THEY maintain control over the money supply and that means maintaining the US Dollar. To DIScourage gold remonetization they have recently flooded the gold markets with “paper gold” - certificates that are worth so much gold but, in fact, represent ZERO gold reserves. By flooding the market with these certificates they have driven the ONLY solid investment hedge through the centuries from $1038. an ounce to the $750 mark … almost $300 an ounce in only a few weeks.
This would be exactly the same as if the GOLD producers, in an attempt to devalue the dollar and increase the price of gold, flooded the market with forged US DOLLARS. One is patently and obviously ILLEGAL. The other is fair game by the banks in protecting their power and influence over the government (obviously it should be the other way around but DC sold its soul a long time ago) and shows more than any other way the depth of corruption they are willing and able to go to to stay the course - until we all get sucked into a depression the likes of which will make 1929 look like a minor slow down.
Sadly the morons in DC will turn to those same banks to provide a fix - a solution - to the depression and the cycle will happen all over again. Revolution anyone?
By DAVE-Y on Sep 10, 2008
Living in a country with with comulsory voting,I see the americans have oportunity to increase the voting numbers greatly as they can call dogs with lipstick hockey moms and perhaps even pigs also with lipstick can vote too and considering recent past american voting this will give chance to improve standards of voting.Having said this still I admit we messup often as well.australian.
By pedro moore on Sep 10, 2008
I think you’re on to something Dave Y. Especially when you look at stock markets just about to rip new lows, Lehman about to bust, escalating problems with Russia, Israel/Iran and the close to $10 trillion US debt. God if China ever wanted to take over the US as a new superpower now is there chance, just stop buying US paper. My feeling is that gold/silver will be at there recent highs when the $%@& hits the fan in the coming months (who knows, coming days).
By Mike T on Sep 11, 2008
Mr. Buffett bought 129 million ounces of silver a few years ago. He still has them. I hear that there is a silver shortage but prices are dropping.
Me thinks the wealthy are driving down the prices so regular folks will sell and they will buy.
By Steve from Ohio on Sep 11, 2008