(March 31): Warren Buffett cautioned that he’s seeing signs of fragility emerging in the banking system as it has become more connected to non-bank players.
The legendary investor said the stability of the financial system should be a high priority for the US Federal Reserve, noting banks like JPMorgan Chase & Co are key cogs in the economy, shepherding trillions of dollars every day.
“They all affect each other, and the troubles from one can spread over to another,” Buffett, the chairman of Berkshire Hathaway Inc, said in an interview with CNBC on Tuesday.
Investors have been rattled after a series of recent blow-ups in credit markets sparked fears that risks are brewing on the balance sheets of banks and private credit funds alike. Buffett, for his part, said that if panic sweeps through markets, many investors will likely head for the exits.
“If people yell fire in a crowded theatre, everybody runs still — it still pays to beat people to the door,” Buffett said. “I will stand back there and say, ‘Everybody stay calm,’ but that’s because I can’t run fast.”
Buffett, 95, recently stepped down as the chief executive officer of Berkshire, the US$1 trillion ($1.29 trillion) conglomerate with interests spanning insurance, utilities, rail roads, energy and consumer goods. The company is also a long-time investor in banks including American Express Co.
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