Warren Buffett on the Future of Banks
Warren Buffett predicts more bank failures but assures depositors they need not worry.
- Buffett suggests that there could be more bank failures in the future.
- However, depositors need not be worried because the system is designed to protect the entire nation's deposits.
- The collapse of Silicon Valley Bank and Signature Bank last month prompted extraordinary rescue action from regulators, who backstopped all deposits in the failed lenders and provided an additional funding facility for troubled banks.
- Some of the "dumb" things that banks do periodically became uncovered during this period, including having mismatched assets and liabilities as well as questionable accounting.
- Buffett says that some bankers will continue this behavior and that will put the shareholders in some of the stocks at risk.
- Buffett emphasizes that banks must retain the confidence of the public as they can lose that confidence in seconds, as highlighted in the recent blowup.
- The public must understand that the costs of the FDIC are borne by the banks, and they have never cost the Federal Government a dime.
- Buffett has been a white knight for troubled banks in the past, famously coming to the rescue of Goldman Sachs and Bank of America.