May 6 (UPI) — The chairman and CEO of Berkshire Hathaway, Warren Buffett, said Saturday that the government’s intervention in recent bank failures was necessary to avert a “catastrophic” crisis.
Buffett said the government was right to protect deposits above $250,000, which are backed up by the Federal Deposit Insurance Corporation.
“Even though the FDIC limit is $250,000 . . . that is not the way the U.S. is going to behave anymore than they’re going to let the debt ceiling let the world go into turmoil,” the Berkshire Hathaway chief executive told tens of thousands of shareholders gathered in downtown Omaha for the company’s annual meeting on Saturday, according to The Financial Times.
Buffet was responding to the recent failures at Silicon Valley Bank and Signature Bank, where the government stepped in to protect deposits over the FDIC level.
“It would have been catastrophic,” Buffett said of a situation where the government didn’t act, according to NBC News. He added that refusing to guarantee all SVB deposits risked a “run on every bank in the country” and, by extension, a threat to the global financial system.
Buffet also said that he was not surprised the banks had failed, saying the U.S. banking system had become overly complicated. He added he’s been selling more bank stocks over the last six months.
“The American public doesn’t understand their banking system — and some people in Congress don’t understand it anymore than I understand it,” Buffett said.
Berkshire Hathaway has a 13% stake in Bank of America, 3.2% stake in Bank of New York Mellon, 2.8% stake in Citigroup, and 0.5% stake in U.S. Bancorp.
Buffet also expressed concerns over the current debt limit battle, saying that not raising the debt ceiling could “cause the world to go into turmoil.” He chalked up part of the problem to politics.
“Partisanship, it seems to be, has moved toward tribalism, and tribalism just doesn’t work as well,” he said.