Tesla CEO says the legendary investor’s pick is the US Treasury Secretary.
The crisis of confidence around banks continues to rattle investors and consumers.
The most frequently asked question is whether the situation, the most dire since the 2008 financial crisis, is over us.
For now, the answer depends on who is doing the answering.
Bankers say the crisis is almost over. Could more banks fail? Jamie Dimon, CEO of JPMorgan Chase, was asked by CNN on April 6.
Damon replied, “I don’t know. But if there was, frankly, it would be resolved. I think we’re nearing the end of this particular crisis.”
This crisis was caused by the sudden collapse of Silicon Valley Bank, the primary lender to many technology companies.
banking crisis
SVB, Santa Clara, Calif., has provided a range of financial services tailored to the needs of startups, such as project debt, corporate banking, and asset management. These services are designed to help startups manage their finances, improve cash flow and expand their business. In addition, the bank has provided industry expertise, a valuable network, and a solid reputation.
Founded in 1983, Silicon Valley Bank (SIVB) – Get a free report, which has positioned itself as a “partner in the innovation economy,” has offered higher interest rates on deposits than its larger competitors, in an effort to attract customers. The company then invested clients’ funds in long-term Treasury and mortgage securities with solid returns.
This strategy has worked well in recent years. The bank’s deposits doubled to $102 billion at the end of 2020 from $49 billion in 2018. In 2022, the deposits increased to $189.2 billion.
But everything turned upside down when the Federal Reserve started raising interest rates, making the existing bonds held by the SVB less valuable. As a result, the bank was forced to sell the bonds at a discount to cover the withdrawals of its customers. In selling these bond positions, SVB incurred a loss of $1.8 billion.
Due to the loss, SVB suddenly announced that it needed to raise $2.25 billion in additional capital by issuing common and convertible preferred shares. This decision caused a panic and a run on the bank.
Since then, fears have spread of a ripple effect, threatening the banking sector, despite the fact that banks too big to fail have been subject to stringent regulation since the 2008 financial crisis.
These fears of infection led to the closure of Signature Bank in New York (SBNY) – Get a free reportOn March 12th.
Warren Buffett as Treasury Secretary
US regulators, including the Treasury Department, have said more than once that the US banking system is strong. These statements, designed to be reassuring, did not discourage individuals and companies from withdrawing their deposits.
At the same time, investors are also concerned about the controversy over the federal budget, which is currently stalled because Republicans in the White House and the White House don’t want to budge at the moment.
In this context, Genevieve Roche-Decter, CFA and former small money manager, released a short video of Treasury Secretary Janet Yellen telling the Senate that she is not worried about America’s mounting debt.
Yellen testified before the Senate Finance Committee on March 16.
“Good morning everyone! Janet Yellen testified before the Senate Finance Committee that she is not concerned about US debt rising from $32 trillion to $50 trillion as long as we are on a sustainable fiscal path,” Roche Decter wrote on Twitter in April. 6. “Newsflash, we’re not on a sustainable path.”
Elon Musk commented on this tweet indicating that he agrees with it.
Roch-Decter seems to be suggesting that Yellen is not up to the challenge. Then Shane asked Musk about his selection for the post of Secretary of the Treasury.
“Elon, who would you rather be Secretary of the Treasury?” she asked.
The billionaire replied, “Maybe Buffett.” “He can do that in less than an hour a week.”
He then added that other successful investors could also do the job, but did not name them.
“Any highly successful investor with a long track record would do well — the job is basically to manage money on a large scale,” Musk said.