Buffett: Berkshire is cautious about banking sector.

Warren Buffett Cautious About Banking Sector

Warren Buffett, the nonagenarian billionaire, has expressed caution around the banking sector.”>banking sector due to poor messaging by officials around government-insured deposits and distorted incentives brought on by banking regulation. A crisis of confidence in the U.S. banking sector has led to the failure of three midsized banks since March as depositors fled from smaller banks, with calls for the Federal Deposit Insurance Corp (FDIC) to raise its $250,000 limit guarantee on deposits.

Poor Messaging Around Safety of Banking System

The messaging by politicians, government agencies, and the media around the safety of the banking system has been poor, according to Buffett. “The U.S. government and the American public have no interest in having a bank fail and having deposits actually lost by people,” he said. “We had a demonstration project the weekend of Silicon Valley Bank and the public is still confused.”

Berkshire Hathaway’s Cautious Approach

Berkshire Hathaway keeps around $128 billion in cash and Treasury bills, Buffett said. “We want to be there if the banking system temporarily even gets stalled in some way – it shouldn’t – I don’t think it will, but I think it could,” he said. Part of the reason for that is that incentives in banking regulation are “so messed up,” he said.

Buffett’s Personal Money

Buffett is not personally worried about local banks. “I’ve got my own personal money, and I’m probably above the FDIC limit, and I’ve got it with a local bank and I don’t worry about it in the least.”

Berkshire’s Bank Stocks

Berkshire has sold some bank stocks in the past six months, after having also unloaded some when the pandemic broke out, and now only holds Bank of America, which Buffett said he is happy with.

Buffett made the comments while sitting behind a sign that said “Available for sale,” while his longtime business partner, Charlie Munger, sat behind a “Held-to-maturity” sign, referencing how banks account for their securities, which has been at the heart of the regional bank crisis.