Warren Buffett restored confidence in banks during the 2008 financial crisis. On Wednesday he offered up some new words of assurance about the turmoil that gripped regional banks in March.
People "do not need to be panicked" about the industry and "nobody is going to lose money on a deposit in a U.S. bank," the billionaire who runs Berkshire Hathaway (BRK) said in an interview with CNBC. "It's not going to happen."
These were the first public comments from the "Oracle of Omaha" in the month since federal regulators seized Silicon Valley Bank and Signature Bank following deposit runs at both institutions.
The failures, the second- and third-largest in U.S. history, triggered panic that more lenders could be equally vulnerable. Regulators, including the FDIC, stabilized the situation by promising to protect depositors and free up more liquidity for other regional lenders.
The FDIC insures depositors up to $250,000 per account and pledged to cover even uninsured depositors at Silicon Valley Bank and Signature Bank. The costs of the FDIC fund used to backstop depositors, Buffett added, comes from banks and not from taxpayer money.
"Banks have never cost the federal government a dime. The public doesn’t understand that."
Buffett downplayed any comparison to the crisis in 2008, noting that in this case some banks mismanaged their assets and liabilities. "Some of the dumb things banks do periodically have been uncovered during this period," said Buffett. But "they haven't made the same sort of mistakes as they made back in 2008."
He also warned that banks can lose the confidence of the public in seconds and that more could in fact go down. "We’re not over bank failures."
Buffett has played the role of savior in past banking crises. During the debacle of 2008, Goldman Sachs Group (GS) came to him seeking capital and his stamp of approval. Buffett injected $5 billion into Goldman.
He then injected another $5 billion into Bank of America (BAC) in 2011, when Brian Moynihan was still a relatively new chief executive and the lender’s shares were under pressure due to losses from subprime loans. He is still a large shareholder of Bank of America.
It was also Buffett who suggested in 2008 to then-Treasury Secretary Hank Paulson that the federal government should inject capital into banks to stabilize the industry. That became an official proposal of $250 billion, even though some of the biggest banks insisted they didn’t need the money.
Reuters reported last month that Buffett had discussions with the Biden administration about the banks. The exact nature of those talks was not known at the time.
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