Now comes Warren Buffett, a big investor in Wells Fargo, M&T Bank and several other banks, who, during his marathon appearance on CNBC Monday, clearly called for suspension of mark-to-market accounting for regulatory capital purposes.Read the whole piece—it's an even more hopeful sign that the one below.
[snip]
Mr. Buffett obviously understands where we are today, though it seems to elude many of those kibitzing about "nationalization," "letting banks fail" and other lagging notions. Since last year, our banking system no longer rests on capital, but on government guarantees. With those sweeping guarantees in place to protect their depositors and bondholders, banks now are able to earn princely spreads above their cost of funds, however questionable their balance sheets.
Banks will "build equity at a very rapid rate with the spreads that exist now," Mr. Buffett said. With the possible exception of Citigroup, he added, "the banking system largely will cure itself."
Wednesday, March 11, 2009
Warren Buffett's solution to the banking crisis
From Buffett's CNBC interview, as reported by Holman Jenkins in WSJ.com:
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1 comment:
Not surprising that Mr. Buffet would put in a good word for book value. By that measure, Berkshire Hathaway was down 9,6% last year. The market value of Berkshire shares? Down almost a third.
The choice between the market and book values of exotic packages of debt seems to be between bad and worse. Sure, some smelly mortgages and some smelly developer loans will work out OK eventually. On the other hand, quoting Floyd Norris in today's NY Times, "If mark-to-market accounting is to blame for the current financial crisis, then the National Weather Service is to blame for Hurricane Katrina…."
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