As the banking crisis in the U.S. unfolded, triggered fears of contagion, and forced the government to stepped in, many on Wall Street were vocal with their opinions. Warren Buffett, one of the biggest all-time investors, however, appeared absent from the conversation.
Now, it seems the billionaire won’t continue to turn a blind eye.
What Happened: Buffett, the chairman and CEO of Berkshire Hathaway (NYSE: BRK-A), has had multiple conversations with senior members of the Biden administration in the past week, Bloomberg reported, citing people familiar with the matter. The two sides have reportedly explored ways in which the “Oracle of Omaha” can invest in the regional banking sector. Buffett, however, hasn’t given any broader advice or guidance on the recent turmoil, the report added.
When Bank of America’s stock BAC plunged in 2011 due to losses tied to subprime mortgages, Buffet’s firm injected capital into the bank. Buffett also gave Goldman Sachs a $5 billion lifeline following Lehman Brother’s collapse in 2008, Bloomberg noted.
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Why It’s Important: When the value of the Treasury holdings in Silicon Valley Bank’s portfolio eroded, the bank was forced to announce a capital raise. Its clients, which consisted mostly of tech startups and venture capitalists, began a bank run, triggering SVB’s collapse. Subsequently, Signature Bank faced a similar predicament and also collapsed.
Though the federal government intervened to backstop deposits at both banks, the crisis set in motion a cascade of run-ins at several regional banks. Shares of those banks consequently plummeted. Last week, a group of banks, led by JPMorgan Chase & Co. JPM, agreed to park $30 billion in troubled First Republic Bank FRC.
Ironically, when First Republic Bank began to face issues and its stock dropped, CNBC host Jim Cramer brought up Buffett’s name. The “Mad Money” host slammed big banks for showing reluctance to own any beaten-down small bank.
“Do we need Warren Buffett to buy a bunch?” Cramer asked. “That’s how these declines often end!”
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