Warren Buffett NYT Op-Ed

[Viking]

Who said anything about deposit base? The problem was loan loss reserves, not deposit reserves.

Besides the general failure of the mortgage and housing markets, two big problems directly lead to the immediate crisis: 1) as a very well communicated quid pro quo to banks for complying with CRA guidelines in all their lending practices, regulators allowed (even encouraged!) banks to hold "risk free" MBSs in their reserve accounts. The payback was the returns that MBSs yielded over treasuries which were traditionally the only non-cash assets banks were allowed to hold as loss reserves. From an historic return perspective MBSs WERE "risk-free" - there had never been a major loss even with mortgage derivatives.

2) Mark-to-market accounting rules, coupled with lehman's sale of it's MBS/ABS portfolio at ~26% of par, set the new value that all banks suddenly had to value their MBS holdings.

Say you were running Citi's Treasury, and you were looking at an expected annual loss of 3.2% on your total receivables of nearly $1 trillion (about right for pre-2008 loss rates). That's $32 billion in reserves that must be held to cover expected foreseeable losses. To keep shareholders happy and to giver Citi the lowest net cost of funds in the industry, say 50% of the $32B was held in MBSs, with the rest in treasuries and cash.

When Lehman sold MBS's at a huge loss, it became the new 'market price.' Literally over night, Citi's treasury had to:
1) move completely out of MBS in their reserve accounts. Need- $16B.
2) cover $12B loss in MBS portfolio that had been in reserves backing up other losses (~$30 billion cumulative)
3) reserve for incremental losses from MBS holdings in general ($50-$60 billion total - call it $85 billion cumulative).
4) reserve for incremental expected losses on receivables/managed assets not in MBS portfolios - their forecasted loss run-rate was ~11.5% by the end of 2008. That's an additional $115 billion in loan loss reserves ~$200 billion in cash needs that had to be held as soon as they restated loss rates - and that's just Citi. Some cash they had. Some they got from a series of TARP loans/asset purchases. Some they borrowed from the emergency lending facility at the Fed.

Total cash needs to meet loss capitalization requirements would've been similar at BoA, a bit lower at Chase, lower at Wells, higher at some others. It's pretty easy to see how the ~$800B in TARP funds got burned through pretty quickly. And even then, some of the TARP bailouts came in terms of Fed loss guarantees (with or without equity stakes for the Fed) that allowed banks like Citi and BoA to reserve less. They were guarantees where no cash actually changed hands, but reserve minimums were lowered nonetheless. They were very real bailouts.

All this being said, TARP was NOT cheap for those that took it. My current company was told to take ~$3.6 billion in TARP funds. We paid it back within about 18 months, and had to get permission to pay it back. In total, we paid an annualized effective interest rate (interest, fees and penalties) of nearly 20% on the money. And we didn't even ask for the cash. We were told that we had to take it...

I didn't say the deposits were the problem; not sure how a deposit reserve could be a problem...

I probably misunderstand you but you make it sound like it was some sort of travesty that crappy MBS's that probably had little value got marked. Similar tranches of MBS should have been marked accordingly. If these masters of destruction--Citi perhaps at the top of that list--had simply not owned comparable toxic instruments, they would not have needed to take the mark. Sorry bud, MBS's might have been risk free pre-2001 but Fannie and Freddie did their part to make them not only risky but toxic.

If your company is who I think, your sr mgmt needed the dough.

[Jacob]

Warren Buffett doesn't appear to be on board with Obama's "Buffett Rule."
As to Buffett's actual proposal, not many are going to waste much time arguing against it. But it would also have a negligible effect on federal revenues.

[YOUTUBE]koDhgSLa-Wk&feature=player_embedded#![/YOUTUBE]

[scottie]

Buffett is on Piers Morgan Live tonight. Interesting info from his Wikipedia page:

Buffett married Susan Buffett (née Thompson) in 1952. They had three children, Susie, Howard and Peter. The couple began living separately in 1977, although they remained married until her death in July 2004. Their daughter, Susie, lives in Omaha and does charitable work through the Susan A. Buffett Foundation and is a national board member of Girls, Inc. In 2006, on his seventy-sixth birthday, Warren married his longtime companion, Astrid Menks, who was then 60 years old. She had lived with him since his wife's departure to San Francisco in 1977. It was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. All three were close and Christmas cards to friends were signed "Warren, Susie and Astrid".

[dabrockster]

Who knew there would be a titled already created for Warren Buffett and NYT..

Warren Buffett’s company invests in The New York Times 6 years after he sold all his newspapers

OMAHA, Neb. (AP) — Six years after Warren Buffett sold off all of Berkshire Hathaway’s newspapers and predicted unending declines for most of the industry, Berkshire disclosed a new $350 million investment in The New York Times on Tuesday.

The somewhat surprising move highlighted the quarterly update Berkshire filed with the Securities and Exchange Commission about the company’s stock holdings in Buffett’s last quarter as CEO. Berkshire also increased its investment in Chevron just before President Donald Trump ordered the arrest of Venezuela’s president, and the Omaha-based company continued selling off more of its Bank of America and Apple shares.

At the time Buffett sold off Berkshire’s dozens of newspapers in 2020 he concluded the industry was “toast.” But even then he suggested that newspapers with a national brand like the Times or The Wall Street Journal might still do well.

“It’s a full circle moment for Berkshire Hathaway in reinvesting in news and a huge vote of confidence by Berkshire in the business strategy of The New York Times,” said Tim Franklin, a professor and chair of local news at Northwestern University’s Medill School of Journalism.

Another interesting investment from Buffett is in Chevron.. It's like he knew something was up..

Berkshire also picked up about 8 million more Chevron shares in the quarter to give it more than 130 million shares in the oil giant. That was a particularly well-timed bet because Chevron’s stock has soared since Trump promised to reinvigorate Venezuela’s oil business, but Buffett has long been bullish about the oil business and Berkshire has been a major investor in Chevron and Occidental Petroleum for several years.

Chevron is the only major American oil company with significant operations in Venezuela, where it produces about 250,000 barrels a day. Chevron, which first invested in Venezuela in the 1920s, does business in the country through joint ventures with the state-owned company Petróleos de Venezuela S.A., commonly known as PDVSA. Chevron’s stock is up nearly 19% since the start of 2026 just before the U.S. captured Venezuela’s President Nicolás Maduro in a raid

https://apnews.com/article/berkshire...4885b5fe0c571f