Berkshire Hathaway’s Warren Buffett has pronounced that the nation’s banks have now rebuilt capital to the point where they no longer are a threat to the economy.
He says bank capital ratios are huge and excesses on the asset side have largely been cleared out. Buffett’s firm has significant investments in four of the nation’s largest banks.
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He says the banking sector is in the best shape in recent memory. Former bank executives disagree, saying the largest lenders still pose risks to the economy.
Citigroup ex-CEO Sandy Weill said last year that deposit-taking and lending institutions should be once again separated from investment banking activities.
Analysts say banks have done little to discourage the excessive risk-taking that led to the crisis.
Wall Street banks still focus on short-term profits instead of long-term results that would favor shareholders.
They say there will still be a lot of bank CEOs that make huge compensation today and by the time new problems hit, they will be gone.
They add it is still difficult to see where the risks lie because banks still lack transparency.
The largest banks still have another round of federal stress tests to pass. The tests will determine if the banks are strong enough to buy back stock and increase dividends.
Buffett says banks’ conditions have improved significantly
because of historic low interest rates that it gives banks more choices regarding buybacks and dividend increases than during the crisis.
He says nine years from now, banks will be worth much more than they are now.