OMAHA: American business magnate Warren Buffett on Saturday criticised the handling of the recent turmoil in the banking industry and warned that a debt ceiling showdown could cause “turmoil” in the financial system.
He, however, expressed his confidence in the United States and his own conglomerate Berkshire Hathaway Inc (BRKa.N).
At Berkshire’s annual shareholder meeting, Buffett criticised politicians, regulators, and the media for their “very poor” message that unduly alarmed depositors in response to the recent bankruptcies of Silicon Valley Bank, Signature Bank, and First Republic Bank.
“You can’t run an economy” when people are concerned about whether or not their money is safe in banks, he said, adding that “fear is contagious.”
Buffett further foresaw a rise in “tribalism” in Washington, where partisanship leads to individuals talking over one another.
We must, in certain ways, improve our democracy over time. However, if I still had the option, I would want to be born in the US. We live in a better world than ever before.
Hours after Berkshire announced a $35.5 billion quarterly profit, Buffett revealed the company had purchased back $4.4 billion of its own stock, indicating that it thought the shares were cheap.
In contrast, during the same quarter that the S&P 500 Index (.SPX) climbed 7%, it sold $13.3 billion worth of stock in other corporations.
Buffett, the sixth-richest person in the world, has been in charge of Berkshire since 1965. Berkshire owns dozens of companies, including the BNSF railway, Geico car insurance, and household names like Dairy Queen and Fruit of the Loom.
Additionally, Berkshire holds $328 billion worth of shares, nearly half of which is in Apple Inc (AAPL.O).
During the meeting, Buffett, 92, the chairman and CEO of Berkshire, and vice chairman Charlie Munger, 99, responded to questions from shareholders for five hours. Vice Chairmen Ajit Jain, 71, and Greg Abel, 60, joined in the early hours.
Buffett reaffirmed on Saturday that Abel will take over as CEO, but he also said he had no backup plan in case Abel was unable to.
LIGHTED MATCH
According to Buffett, it was appropriate for authorities to provide Silicon Valley Bank depositors with guarantees. Otherwise, it “would have catastrophic consequences.”
Additionally, he asserted that bank shareholders and executives should shoulder the costs of poor management. Munger criticised CEOs for focusing more on their own financial well-being than their consumers.
Buffett observed, “A lighted match might become a firestorm or be blown out. “You must punish those who violate moral standards.”
In addition, Buffett said he could not envision politicians or regulators being ready to “disrupt the world’s financial system,” even if Washington was unable to resolve its standoff over extending the debt ceiling or the amount of borrowing allowed by the government.
