Warren Buffett in contact with Biden officials on banking crisis as US small lenders seek wider deposit guarantee
- Buffett has a history of stepping into banking crisis, leveraging his investing status and financial heft to aid Goldman Sachs, Bank of America in the past
- A coalition of midsize US lenders has asked regulators to extend federal insurance on deposits for two years to prevent a wider run on banks
Berkshire Hathaway’s Warren Buffett has been in touch with senior officials in President Joe Biden’s administration in recent days as the regional banking crisis unfolds.
The outreach between Buffett and the administration was described by people familiar with the matter, who asked not to be identified discussing private information. It wasn’t immediately clear what role, if any, the billionaire investor may play to contain the crisis after the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital earlier this month.
Buffett has a long history of stepping in to aid banks in crisis, leveraging his cult investing status and financial heft to restore confidence in ailing firms. Bank of America won a capital injection from Buffett in 2011, after its stock plunged amid losses tied to subprime mortgages. Buffett also tossed a US$5 billion) lifeline to Goldman Sachs in 2008 to shore up the bank following Lehman Brothers’s collapse.
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Representatives for Berkshire and the White House did not immediately respond to requests for comment. Officials at the US Treasury Department declined to comment.
US regulators unveiled extraordinary measures to assuage customers last weekend, promising to fully pay out uninsured deposits in the failed banks. Shares in regional banks continued to fall this week on fears the pain would spread.
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Biden’s team, wary of political blowback, has moved to orchestrate backstops that do not require direct government spending from taxpayers, including the Federal Reserve’s actions. Big US banks voluntarily deposited US$30 billion to stabilise First Republic Bank this week, a move regulators described as “most welcome.”
Any investment or intervention from Buffett or other figures would continue that playbook, looking to stem the crisis without direct bailouts.
Meanwhile, a coalition of midsize US banks has asked regulators to extend federal insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks.
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“Doing so will immediately halt the exodus of deposits from smaller banks, stabilise the banking sector and greatly reduce chances of more bank failures,” the Mid-Size Bank Coalition of America said in a letter seen by Bloomberg News.
The collapse this month of Silicon Valley Bank and Signature Bank prompted a flood of deposits out of regional lenders and into the nation’s largest banks, including JPMorgan Chase and Bank of America. Customers spooked by the bank failures were taking refuge in firms seen as too big to fail.
