Buffett is reportedly speaking to the White House about banking problems
Dhe famous investor Warren Buffett is apparently in contact with senior officials in the Biden administration in view of the banking problems in America. This is reported by the financial service Bloomberg, citing several people familiar with the matter. According to the report, however, it was not clear in what form Buffett could play a role in containing the current situation. In the United States, a number of medium-sized financial institutions are in distress, including Silicon Valley Bank, Signature Bank and First Republic Bank.
Buffett has used his iconic investor status and financial clout to restore confidence in troubled banks on a number of occasions in the past. Bank of America received a capital injection from Buffett in 2011 after its stock price plummeted due to losses related to subprime mortgages. Buffett also granted the investment bank Goldman Sachs a cash injection of 5 billion dollars in 2008 as a result of the then escalating financial crisis.
Association of medium-sized banks sounds the alarm
Officials at Buffett-led Berkshire Hathaway and the White House did not immediately respond to requests for comment, according to Bloomberg. Treasury officials declined to comment.
According to the Bloomberg agency, the Association of Medium-sized American Banks (MBCA) is also asking the supervisory authorities for help to prevent a customer rush (bank run). The institutes asked the deposit insurance fund FDIC for insurance for all customer deposits for the next two years. According to a letter from the group to the FDIC, this would immediately prevent the withdrawal of customer funds from the smaller banks.
In addition, insurance would stabilize the banking sector and significantly reduce the likelihood of further bank failures. Confidence in the banking system as a whole must be restored immediately. Should another bank collapse, this will lead to further panic withdrawals from other institutions. According to the information, about 110 banks with a maximum balance sheet total of 100 billion dollars belong to the MBAC.
The American supervisory authorities have already taken extraordinary measures in the past few days to calm nervous bank customers. Regional bank stock prices continued to fall this week. A few days ago, major American financial institutions again paid in $30 billion to stabilize First Republic Bank, a move that regulators described as “highly welcomed.”