On Sunday, Bloomberg reported that sources within the Biden administration were saying senior US officials have been in talks with the Oracle of Omaha, Warren Buffet, on the unfolding banking crisis, and possible solutions to it.
With a fortune worth roughly $101.6 billion, Buffet is among the world’s most successful investors. Presently he sits at the helm of the Berkshire Hathaway conglomerate, with stakes in dozens of the most successful companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.
The talks between Buffet and the Biden administration officials occurred over the past week, and revolved around the possibility of Buffet possibly investing in the banking sector, as well as any advice he could offer on how to stabilize the volatile situation unfolding within the industry.
The crisis was set off following the collapse of three mid-sized lenders in the US in the space of under a week, First Silvergate, a crypto-focused lender announced its liquidation on Wednesday. Two days later, on Friday, the situation at Silicon Valley Bank (SVB) had deteriorated so quickly due to a run on deposits that regulators swooped in and seized the bank. Then on Sunday, regulators seized crypto-focused Signature bank, amid a run on its deposits.
The bank runs were set in motion as investors grew worried recent interest rate hikes would devalue bank assets such a Treasuries to the point they could not cover depositor withdrawals.
The entire banking industry has been shaken by the fallout, as dozens of other lenders have seen their share prices plunge. Depositors have begun pulling their funds from smaller and mid-sized lenders, so they can be moved to bigger banks, more likely to be deemed, “too big to fail.”
A new study by the Social Science Research Network found that there are almost 200 more banks facing the same risks which led to the collapses of Silvergate, SVB, and Signature banks.
It would not be the first time Buffet had aided banks. Following the financial crisis of 2008, he invested $5 billion in Goldman Sachs, and in 2011, Bank of America acquired a capital injection from him after its stock fell due to losses from subprime mortgages.
