Buffett's Comments on the Banking Crisis

Buffett joked that Munger can be described with terms popular in the banking industry: "Available for Sale" (available for sale) and "Held to Maturity" (hold to maturity).

Buffett believes that the situation in the banking industry is not much different from the situation that the industry has always existed in the past. "Panic is contagious, always has been," said Buffett, whose father lost his job in a bank run in 1931.

In the past, if you saw people queuing at a bank, the correct response was to join the line, Buffett said. Now it is 2023, and we see that the regulatory agency FDIC can return deposits to every depositor, but everyone is still worried. In his view, this should not have happened and the message was poorly communicated. Politicians, institutions, and the media have not communicated the changing situation well.

Buffett says the incentives for bank regulation are too confusing and many people want to make them go wrong. This is crazy. If you feel that deposits are no longer sticky, it is because the times you live in are different. Because of online banking, we can have a run in seconds.

Buffett said that those who do wrong must be punished. Bank directors have the ability to hold CEOs accountable. If a bank fails, both the CEO and the directors should suffer, otherwise no lesson can be taught.

Munger said, I am very old-fashioned, I prefer banks that do not do investment banking business.

Buffett went on to say that the bank's depositors will not lose money, it should be shareholders and bondholders who lose money, and those who borrowed money using commercial real estate when the loan period was not extended. Those who cause problems must be punished in order to change their behavior.