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Warren Buffett said Americans should not be concerned about their bank deposits in the wake of the latest financial shock in the sector and the government would ensure no depositor in this country lost a dime.
“People shouldn’t be worried about losing the money and the deposits they have in an American bank, and today, they have no reason to worry,” said the Berkshire Hathaway chairman and CEO in an interview with Becky Quick from Tokyo on CNBC’s “Squawk Box” Wednesday. “But the message has gotten very confused and people don’t really understand how it all works.”
The banking sector went through a brief panic in March as depositors fled Silicon Valley Bank, which had mismanaged its bond portfolio and was overly leveraged to the tech industry. Fear grew that depositors with more than the $250,000 FDIC insurance limit would lose their money. But over the weekend on March 12, the government backstopped all depositors in SVB, along with those in Signature Bank, no matter the amount they had with the banks.
Buffett said the government would likely step in to backstop all depositors in all U.S. banks if that was ever necessary, though he did note that would require Congressional approval.
“We’ll get the OK,” he said when asked if Congress would approve that extraordinary action. Buffett noted that Congress would also adjust the debt ceiling for this to take place in order to avoid financial ruin for the country.
The banks closures have set off a crisis of confidence among investors and customers as they questioned whether other financial institutions could face the same fate. Bank stocks largely tumbled in March as investors grew skittish on the sector, with the selloff specifically focused on regional banks amid liquidity concerns. To restore confidence, 11 banks put $30 billion in deposits in First Republic Bank, whose shares have tumbled during the shock.
Buffett noted that shareholders may lose out if more bank failures occur and rightly so, but depositors shouldn’t be worried.