Warren Buffett No Longer Trusts Banks More Than The FDIC Does

Warren Buffett's Berkshire Hathaway Inc. has told one of its subsidiaries to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers.

The subsidiary, Kansas Bankers Surety Co., is notifying about 1,500 banks in more than 30 states that it will no longer offer a program called "bank deposit guaranty bonds." KBS is an 18-employee subsidiary of Berkshire Hathaway, according to the parent firm's 2007 annual report. It is one of a handful of firms that offer such insurance, a big selling point for banks trying to attract wealthy customers.

Two people briefed on the matter said the order was made Monday by Mr. Buffett, Berkshire Hathaway's chief executive. Chuck Towle, a senior vice president at KBS, declined to comment on why his firm was leaving the business. "We have decided to do so," he said. "We'll work with each individual bank and work it out with them."

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Related:

::The Huffington Post's banking crisis big news page

Comments

[helen]

Berkshire/Hathaway does not want to be bankrupted by the coming bank failures, so they are cutting and running.

[bitabingbitabangbitaboom]

When there is no more no more money to lend; there is no more money to lend

[darthdarcy]

We've seen 11 Bank failures so far this year but up to 139 more are likely to fail shortly...

The IndyMac Bank failure used up 25% of the FDIC reserve..!

[RadCenter]

Please God make Warren Buffett our next Treasury Secretary!

[jacknapier]

that would be brilliant.

[jeanrenoir]

If he would serve with Obama, and Obama announced it tomorrow, Obama would win by a Reagan landslide. It's hard to believe Powell wouldn't love to redeem himself as Sec. of State or Defense with Obama. If Obama announced Buffett and Powell for his cabinet, he'd win 49 states. Palin would be welcome to take the moose vote.

[BillyShears]

He's already one of O bama's economic advisor- as if we needed any more proof that this guy will make a great president.

Obama08

[mathme]

He's honest and ethical. Really amazing how he rallies against anyone who wants to lower his taxes. He doesn't only understand financing but also social responsibility. It's NOT just about being a "bleeding heart," but it also bolsters the economy and our national strength.

News flash: it's not YOUR money, you could not have earned it outside of the protection and organization of the United States as an institution. Sure, you more than deserve the results of your labor (used loosely), but you didn't build yourself up from nothing in a vacuum. Buffet gets that. He's one of those incredibly wealthy people whom you can look at and say, "Yeah, he deserves it."

[Swedishgal]

Really? OMG! That is so cool. Obama is definitely fit for President and ready to work on Day 1. If anybody can get us out of this mess its Warren Buffet. The man's a financial genuis.

[hypnotoad72]

Who's McCain's economic advisor? I recall Carly Fiorina on his team, but I don't think it was for that specific position...

[mrcontinental]

We've been proclaiming the financials dead for about a year now but no one has been listening. They have tried everything yet each month just more and more losses.

They have been artificially supressing the prices of gold and silver hoping that the rubes would panic sell yet smart money is simply buying ever more of them; heavy on the silver I might add...I know I am.

Fannie and Freddie will be the death blow for hundreds of regional banks, and yes a few of the biggies will fall as well, and the prefered stock segment of the markets will go belly up soon enough once the extent of the ravaging from Fran & Fred is known. This TRILLION+ bailout for the rich has hardly even registered with the shpeople obsessing over Sarah Palin, whether pro or con. The election is merely a distraction and no matter who wins when you wake up your country will be history.

Soon US treasuries will achieve junk staus as well because it has become obvious that we cannot and will not payoff the massive debt that we have run up no matter how much the government steals from us the taxpayer.

[MadeinAmericaProud]

That proclaiming of financial death for a year is known as the trickle down, the republicans love to do.

All at once is only a great line in a song. The American can not handle the truth all at once says Bush and Cheney. Remove the war actions from Tv and remove the flag pine boxes coming in daily.

They only release a few names for ABC this week Sunday show. Not the ages of the soldiers.

[ErnestineBass]

Where you been, darlin'?

The Business Section just ain't the same without you, mr.c.

[joebaggadonuts]

No use throwing good money after bad, eh Warren?

When Warren Buffet is stepping into a business to preserve capital, or even just to end a potentially disastrous business line which is currently profitable (assuming it is) it's certainly something we all need to worry about. Not just those of us who might have more than 100K in a bank deposit, all of us. He's saying he can't afford to lose by continuing a business that insures these deposits. To me this seems to mean banks are going down in his estimation, and are likely to be taking the depositor's money with them.

[Henry]

First of all, the Federal Government does not guaranty deposits. The FDIC was created by the Glass Steagall Act of Congress circa 1934. The FDIC is a government created corporation that assess banks in this country on their reported deposits. The insurance assesments are, by law, put into a fund comprised of U.S. Treasury Bills. If the FDIC goes "tits-up" like its cousin the FSLIC there is no government "guaranty". When the fund is gone... well turn out the lights. You and I have no obligation. George Sr. bailed the FSLIC if you recall. He's the second biggest socialist in your life. (behing his son)
The FDIC rates banks through bank examinations. Problem banks are so dignified. When a bank is insolvent, its chartering authority pronounces death and the FDIC is appointed Receiver. It pays it's legal obligations but it also acquires all the assets of the failed bank. Vulture sales occur to replenish the fund. The FDIC, as a regulator, cannot be an entity that "trusts" banks or distrusts banks. It is not a matter of "trust" it is simply a matter of insolvency. The FDIC Division of Liquidation are morticians. When your capital is insufficient (in Regulatory terms) your bank gets a "capital call", if you cannot meet this $$$ you are closed. end of story.

[AlanBJ]

News Flash:

Speaking of finances, you need to know this.

Oh My God! The GOP is planning to sell our oil from Alaska to Japan, & they will raise the price in the US beyond belief. Pass this along:

September 2, 2008

The Honorable Samuel W. Bodman
U.S. Department of Energy
1000 Independence Avenue, SW
Washington, DC 20585

Dear Secretary Bodman,

On June 3, 2008 and July 30, 2008 respectively, your Department issued and affirmed an order pursuant to Section 3 of the Natural Gas Act that will allow two major integrated oil companies " ConocoPhillips and Marathon Oil " to export 98.1 billion cubic feet of Alaskan natural gas to Japan and other Pacific Rim countries. This order, which will allow the export of as much natural gas as is used by 1.4 million American families in a year, comes at a time when the President had demanded that the moratoria on oil and gas drilling along our environmentally-sensitive coastal areas be lifted and Americans are being warned that their winter heating bills are going to be dramatically higher. The Administration is trying to have it both ways " arguing that we need to drill everywhere because we don"t have adequate energy supplies, while finding that we have so much energy that big oil companies can export it overseas and keep prices here at home higher than they would otherwise be.
http://www.dailykos.com/

[curocat]

This happen before. We had a fuel crisis, the Oil companies said give permits to drill, price went down for a short while then went back up, congress said whats going on, Oil Co. said we are selling the oil to someone else. Congress why??? Oil said we can get it cheaper from the Saudis, besides it cleaner oil... They made profit both ways..

[UnknownSoldier]

Fibonacci

[americaforme]

These attitudes about Buffet shouldn't suprise anyone, he's all about greed too. There will be alot of rats jumping ship, very soon. Banks in the Caymens are doing nicely, the rich and richer, have prepared for this, aside from income tax. Our standard of success is money, our God was the almighty dollar, a country built on screw the other guy, no suprise, were going down the tubes. They want us to boot strap it, we'd better God strap it.

[dadw5boys]

FOR THE FIRST TIME IN HISTORY THE USA WILL FAIL TO MAKE THE INTERST PAYMENT ON IT'S NATIONAL DEBT !!!!!!

DUE OCTOBER 1st ----- $ 511,000,000.000.OO BILLION DOLLAR INTERST PAYMENT !!!!!

[curocat]

Nice going repubs...

[cat300]

You guys are loony!

[mathme]

Um... what is loony about that?

[lejman]

another example of how our economy is fundamentally sound.

[jacknapier]

this is a great quip about McSame.

[BethStuart]

Buffet gave an interview several months ago to Der Spiegel, a German magazine much like Time. In it, he said he was looking for German companies to invest in. Buffet also said he thought the German economy was strong because Germans (unlike the citizens of certain other countries) understood something about economics. To the best of my knowledge, the interview was never translated and reported in this country.

The Republican strategy of stigmitizing knowledgeable people as elitist and out of touch has started to pay very negative dividends. Buffet's latest decision to cut back on deposit insurance is a bad sign of economic shocks to come.

[ella52]

Absolutely correct.
Also Thomas Friedman's new book Hot Flat and Crowded is incredible and he talks about how investments need to be in Green Technology.
I like Warren Buffet. I like how he makes complicated issues more understandable.
Wish they would offer him Secretary of the Treasury, or some advisor post.
We have transferred all this wealth to the very few, we have had trickle down economics, unregulated markets and wow, things are falling apart. Surprise, Surpirse.

[curocat]

I saw him on PBS Bill Moyer Review. They talked about his new book.. It was very interesting...

[MadeinAmericaProud]

American fell apart years ago. we have been using crazy glue and credit cards.

[US]

The greatest service Mr. Buffet could perform for his country is to educate the public about economics, QUICKLY! The economic crisis that the U.S. is experiencing MUST BE addressed by both parties and more importantly, U.S. citizens. Please voters, before you pull the lever in November, look at the federal budget/deficit . Let's demand a serious discussion of the REAL issues facing this country and get off stuck-on-stupid smoke and mirrors.

[RadCenter]

Remember Ross Perot's famous "flip charts"? He's now updated them and placed them online. Good primer on how the budget works:

http://perotcharts.com/

[mathme]

He needs to get back in this race! Go Perot '08! (not that I would vote for him, but I know that people would ;) )

[gopSTEALSyourTAXmoney]

And McCain is the worst person anyone could put their trust in ------KEATING FIVE!

[curocat]

Don't forget the Silverado S&L.....

[Swedishgal]

It would be GREAT if Obama allowed Buffett to speak at his rallies to explain how financial things work and how the Repubs have screwed all of us, even the idiots that are voting Repub. Oh wait. we're libs, we know how we've been screwed. I double dog dare McSame to ask Buffett to speak at one of his rallies and let the morons know there how the Repubs have screwed them for years to come but if they want to vote to vote for McCain and Repubs and continue getting screwed then to knock themselves out.

[dadw5boys]

Is this Buffet kicking Bush in the nu$s as he goes out the door ???

[Chavez08]

OK, I obey all the Huffpo written rules and stay on topic but, for no apparent rhyme or reason, 1/2 of my comments get scrubbed.

I guess moderatorating is stylistic at HuffPo(?)

[Henry]

Chavez,
If everything you write is posted here, you can be certain that you amount to nothing more than "boring". Everything is gained at the margin.

[Chavez08]

Oh Henry,

What do you contribute besides Neocon chants and sideways, obscure unintelligable insults?

What substance do you have? What ideology do you stand for? Do you stand for anything at all or are you just so bored and depressed you feel you need to use uninvited, lame heckles to derail intellectual dialogue?

Are you jealous? Are you really THAT afraid your party will be unseated and people again will live peacefully, prosperously and America will no longer be for sale on discount to the UAE?

Care to expose anything about yourself that can't be found in an airport restroom?