It was reassuring to hear Buffet indicate the same message I have advocated for the current banking crisis. I would take some issue with the mention of regulators and ‘messaging’.
The nature of regulation needs more than messaging and should be re-calibrated to reduce the potential for bad management. I maintain regulation needs to address bank funds matching procedures.
Snippets of Bloomberg reporting on Buffet comments
Striking a more serious note, Buffett faulted the executives in charge of the failed banks, arguing they should be held accountable for mistakes that were hiding in “plain sight.” He also called out “messed up” incentives in banking regulation, as well as poor messaging by regulators, politicians and the press to the American public about the upheaval.
Buffett pointed to First Republic Bank (FRCB), the beleaguered lender which JPMorgan Chase & Co. (JPM) just rescued. First Republic’s filings showed the lender was offering jumbo, non-government-backed mortgages at fixed rates that were interest-only for ten years in some cases — which Buffett called “a crazy proposition.”
“It was doing it in plain sight and the world ignored it ‘til it blew up,” Buffett said.
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