Buffett says banks are free of excess and pose no threat to U.S.

January 10, 2013 by · Leave a Comment
Filed under: Opinion 

The banks will not get this country in trouble, I guarantee it,” – Buffett, chairman and chief executive officer of Berkshire Hathaway Inc.

Maybe he knows something we don’t, likely.  I guess the hundreds of trillions of derivatives, home equity lines of credit on underwater mortgages and other off-balance sheet assets are just fine.  What I decode this message as truly saying that no matter what happens, the U.S Treasury in partnership with the Federal Reserve, will bailout and issue what ever amount of credit is needed so that none of our too big too fail banks,…fail.

Mr. Buffett, sir, our country is already in trouble, even in your own words, everyday we are mortgaging off a little bit of our country every day (Charlie Rose Interview).  We are backing bad money and bad debt and according to Gresham’s Law, bad money chases good money out of the market.   At the same time we have reduced interest rates to zero so we are burning anyone who has saved their money and instead, forcing them to speculate on riskier assets.   Too top it off, we have codified a two-tier legal system for influential people like yourself and everyone else, like myself.

Maybe you are right, banks do not pose any threat to the U.S.

Bloomberg - Warren Buffett, the billionaire investor who oversees stakes in some of the largest U.S. banks, said the nation’s lenders have rebuilt capital to the point where they no longer pose a threat to the economy.

“The banks will not get this country in trouble, I guarantee it,” Buffett, chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., said in a phone interview last week. “The capital ratios are huge, the excesses on the asset side have been largely cleared out.”

Lenders including Bank of America Corp.  and Citigroup Inc. have sold assets, cut jobs and bolstered balance sheets after repaying taxpayer bailouts from 2008, when the companies were overwhelmed by losses on securities tied to the housing market. Those actions helped boost financial stocks last year and increased the value of Berkshire’s holdings.

Buffett’s firm has investments in at least four of the seven biggest U.S. lenders by assets, including a stake of more than $14 billion in San Francisco-based Wells Fargo & Co., $5 billion in Bank of America and warrants that allow it to buy $5 billion of Goldman Sachs Group Inc. shares. Berkshire also has a holding in U.S. Bancorp.

“Our banking system is in the best shape in recent memory,” Buffett said.

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