Warren Buffett's Philosophy On Investing In Banks

Tyler Durden's picture

In light of last week's surprise announcement of Buffett's bailout redux of Bank of America (the first one being Goldman back in 2008), and following today's even more surprising objection by the FDIC which threatens to scuttle the Bank of Ameria settlement and force Bank of Countrywide Lynch to raise far more capital, pushing Warren to double down on his investment throwin more good money after bad, especially if the legal case moves from an Article 77-friendly NY state court to Federal, here are the philosophical thoughts from the Berkshire's oracles contained, in his "Collected Writings", on his desire to put money into banks.

And we quote:

The banking business is no favorite of ours. When assets are twenty times equity-a common ratio in this industry-mistakes that involve only a small portion of assets can destroy a major portion of equity. And mistakes have been the rule rather than the exception at many major banks. Most have resulted from a managerial failing that we described last year when discussing the "institutional imperative:" the tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so. In their lending, many bankers played follow-the-Ieader with lemming-like zeal; now they are experiencing a lemming-like fate.


Because leverage of 20:1 magnifies the effects of managerial strengths and weaknesses, we have no interest in purchasing shares of a poorly-managed bank at a "cheap" price. Instead, our only interest is in buying into well-managed banks at fair prices.

Perhaps a better title for this post would "Buffett on lemmings"...

Full humorous musings:


h/t Geoffrey Batt

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TruthInSunshine's picture

Warren Buffett likes Coca-Cola, Dairy Queen, Nebraska Furniture, baseball, apple pie & Chevrolet, and he has the pure, salt of the earth wisdom, and gentle ways of the most loving grandfather.


Obama 2012 election campaign quote (so get used to it): 

"And Warren Buffett agrees...[blah blah blah telemprompter]"

Id fight Gandhi's picture

Insider information and manipulation go a long way. You don't think you can make billions doing things the honest way do you?

bigdumbnugly's picture

the formula:

buffet in bathtub + bubbles therein + lecherous thoughts of becky quick + coincidental redline phone call

multiplied by

inside info - fast and easy money off sheepsuckers to follow - altruistic good ol' boy veneer 


$$$ squared for the ol' oracle





Hugh G Rection's picture

Warren Buffets Philosophy On Investing in Banks.


* See Gordon Geckos philosophy on investing in Airlines.

spiral_eyes's picture

Buffett's philosophy on banks:

Beat self over head with blunt instrument. 

Thomas's picture

Put him in Matt Simmons' tub. He is such a liar.

Caviar Emptor's picture

Yes...just pick up the phone...talk to the Prez. Get in the tub and get a brilliant insight, a piece of genius: why not just piggy back onto a huge taxpayer-funded gov stimulus plan that will be a back door bailout to BAC? 

That's what I call "free-market capitalism" at its finest! 

Barbar's picture

free markets are an illusion... this is the norm. capitalism does not work without corruption and class warfare. it's so obvious now that it takes a genius not to notice it.

Hustler Elite's picture

Central banking and free markets cannot co-exist, when you have one you cannot have the other.

We have not had anything even resembling a free market in the US in close to 100 years.

writingsonthewall's picture

Intervention is a result of free market failure, we HAD free market capitalism but it doesn't work well with humanity because too many people will fuck each other over for a buck.

Free markets could never work, and it's been proven. This fantasy land of 'let the market decide' is total crap, often spoken by those who wouldn't have to stand outside your local bank and explain tot he mob that 'sorry, all your savings have gone, it's the free market you know'....shortly before being torn limb from llimb.

The sooner people give up this fantasy the better.

Face facts, unless you're warren and able to buy banks with 'spare cash' then you're a loser in capitalism, no matter what you tell yourself about 'I'm doing ok'.

The system only keeps going because of the cretins who believe in it, just like a ponzi scheme.

Cdad's picture

...until he blatantly supports a candidate for president with Marxist tendencies, or when he is writing his treatises on population control....at which time he goes from loving grandfather to dangerous fellow with enough money to fund all of the worst things [like Marxists or crony corporations that have almost destroyed America] exactly at that point in time when he is approaching prime dementia years.

Sweet!  Go grandpa....ALL IN ON Blight on America Bank!

Barbar's picture

the liberal usage of marx here is completely random at best and rather ironic given that capitalism has eaten itself the way he predicted.

nonclaim's picture

Eaten not by capitalism (a concept defined by Marx himself, in this context) but by the Marxists disguised as "capitalists" as he envisioned it.

The fault is in believing the label while glazing over the rotten content.

Barbar's picture

eaten by decreasing marginal profitability, monopoly-seeking, rent-seeking, concentration of wealth, imperialism (read vietnam/iraq/afghanistan/libya/cia/[insert imperialist war du jour here]) and compound interest... everything else is hokus pokus...

cgbspender's picture

Those are actually symptoms of statism, sir.

Barbar's picture

capitalism is not possible without the capitalist state protecting capitalists' interests. it has always been that way. now that it's so blatantly obvious, the average us citizen has started to notice. progress.. 

nonclaim's picture

Your overuse of capitalism/ist does not make it so. When you stop rationalizing and *see it* for what it is you'll realize they are Marxists. The country is being increasingly run by marxists, more and more, while they in unison blame the "capitalists" (but really themselves, as defined by Marx) and you take it like a well programmed/brainwashed human that you are.

When the "fat cat capitalists" are labeled so they accept it. It is their team role to take the blame.

I hope you understand it because you'll then see a lot more with clear eyes. But I don't really think you'll...

Bring the Gold's picture

Marxists? WTF people! This is Fascism come on! Corporations and Government working together to form a behemoth aparatus that grinds away the common man. These guys are about as Marxist as Adolph fucking Hitler and I mean EXACTLY as Marxist as Hitler.

Let me conclude by saying fuck Marx, fuck Hitler and fuck this bullshit mess by whatever label our government has turned into. A sad, sad day in America no matter what label you want to put on this steaming pile.


nonclaim's picture

They are mostly the same.

But let us disagree on the name/thing and agree that, whatever it is, it is bad and should be fought with mind and body... till the end.

Bring the Gold's picture

We can agree to disagree on the label (which I note is often divisive). Far more important that people agree that the monster one attempts to describe is indeed a menace to all.

It needs to be  reclaimed, reformed, reshaped, and redirected. Let us all pray it's not too late for a peaceful outcome. At the very best the hour is late indeed.

Pay Day Today's picture

Sorry the US is not a Marxist run society. If it was, ordinary workers would own the means of production, finance and distribution themselves, and they would pay the economic surplus generated to themselves.

They don't, so its not.


GoinFawr's picture

You`ve got your work cut out for you Babar. I believe you'll find that a disappointingly large portion of ZH`ers conflate Marx with, well, anything they don`t like and a lot of other stuff they don't understand, no matter how unrelated. Loudly.

For some here it's the preferred version of Godwin's Law.

Zero Govt's picture

Marx didn't define capitalism (i think i'm the only person in history that has properly defined it to date) ...instead Marx defined the chip on his shoulder (jealousy) and an idealised world where his moronic philosophy would work

...if he understood capitalism, like all the socialists in history, he'd understand why it wouldn't work ...but reality is not the idealists strong point 

nonclaim's picture

Quoting myself,

a concept defined by Marx himself, *in this context*

I should have said in *his* context. He needed an excuse, so, like a good politician, he created an enemy and put a label on it. The thing is that not many are stupid enough to, paraphrasing badly, "sell the rope used to hang themselves". That's why his class revolution is taking so long to happen, thankfully.

So, they need to create this class of "evil capitalists" but it takes a lot of money and a bunch of willing/washed morons to take the blame. Funding used to be from drugs... still is but seems that there are much easier ways now. I'll leave it at that.

Barbar's picture

funny.. i learn from this thread that there are "good" capitalists and "bad" capitalists.. only if it were for good capitalists everything would be fine... there are no good/bad capitalists. concentration of wealth and diminishing marginal profitability lead to rent-seeking, monopoly seeking, corruption and imperialism for all eyes willing to see. it was always like this. it always will be. good thing the us citizen is at least seeing the present corruption. maybe with some critical thinking he will also connect the dots and see the omnipresent corruption indogenous to capitalism. the tale of perfectly competitive free markets is a tale. there never has existed one there never willl.. maybe fruit/vegetable markets, which now are facing extinction brought to you by the wonderful capitalist monopoly-seeking inventions of monsanto...

the us entered the first world war by organising false flag attacks on its vessels so that capitalists could sell nerve gas to both sides. the us entered the second world war by allowing japs to bomb pearl harbor so that capitalists could make more money. the us organised another false flag attack on ny and killed 1 million iraqis so that oil could keep flowing and haliburton could make a few bucks meanwhile. there's no "clean" version of capitalism. wake up!

and for the nth time.. no, obama is not a marxist. if he were, he would not be waging imperialist commodity wars in afghanistan and socialising bank losses. marx would probably be severly frustrated if he knew people called slick imperialist puppets marxists... 

nmewn's picture

Communists & fascists are just bickering brothers spawned from the same demon. 

They both promote the state as superior to the individual.

It would be difficult for me to pick between them in a line up...but I can say my second shot would settle the matter.

Pay Day Today's picture

Individuals aren't important in the current American system. Unless you have a net worth over $10M that is.

Freewheelin Franklin's picture

Syndicalism, or unionism, is loosly based on Marxist economics, or "Labor Theory of Value". Carl Menger and Eugen von Böhm-Bawerk showed us that all value is "subjective", based on the principle of "diminishing marginal utility".

Capitalism has not eaten itself as Marx predicted, Capitalism has been destroyed by hostile forces as Joseph Schumpeter predicted.  

Landrew's picture

Warren (Mr. Potter) Buffett is all about self sacrifice. Mr. Potter would never foreclose on the middle class would he?

TruthInSunshine's picture


Warren Buffet's investment in BAC is altruistic, and he plans on saving orphans and widows from being foreclosed upon!

He's a great man, this Warren Buffett [senator's son].

IMA5U's picture

He also likes hookers, money and power


And pretending he is folksy.  He's a smart guy.  People buy into it.

bugfixx's picture

Becky Quick is a hooker?

nope-1004's picture

Crony capitalist.

Freddie's picture

Drudge's has a link to the NY Post. The article is about how Berkshires owes the IRS back taxes as far back as 2002!   Buffett is a slimeball.

NotApplicable's picture

Slimeball? Buffet is always going on about how he doesn't pay taxes, so you've got to give him credit for honesty.

lolmao500's picture

Yeah the FDIC opposes it because they don't have enough information... till they get ``more information`` they'll be for it... or for a ``better deal`` for those sons of a whore at BAC.

IMA5U's picture

I hope The Thief of Omaha's attempt to be remembered as "The Greatest Investors" fails.

It is easy to be great when the deck is shuffled in one's favor.

Id fight Gandhi's picture

Buy and hold my ass. He does backdoor sweetheart vulure deals. If he believed in BAC he would have bought the common. Fuck this.

Lazlo Toth's picture

+1 correct.

He got a sweet deal he would not have done otherwise.

He is a general bull(shitter) and by saving B of A he gets to save other assets of/besides his own that would following the pandemonium of a B of A takeover by JPM.

He has sold out. You have to remember he has already pledged half his fortune to charity. You think he really gives a hoot-a-nanny if he really lost a 5 billion dollar insurance policy. Or someone threatened him in the tub. 80 year old men are easy to "get rid of naturally."

Especially considering he couldn't spend all his money before he died, even if he tried.




Thomas's picture

He's just George Soros with truth issues.

Fancy Bear's picture

Is this site above copyright laws? I knew it was all-seeing and powerful, but damn.

Freddie's picture

LOL!  Yeah Google/NSA, Big Brother and Buffett are my "friend." 

"Would you like a toaster with your Bank of America passbook savings account Mr. Durden?"


kito's picture

@tyler--not if youre facebook or microsoft ;)

Cursive's picture


I see what you did there.

JW n FL's picture

Fancy Bear

Is this site above copyright laws? I knew it was all-seeing and powerful, but damn. ************************************************************ Did Tyler put your scumbag Wall Street firm out of business? are you part of one of those Chinese Frauds? are you and evil Goldman Sachs (JP Morgan Shield) people?
Fancy Bear's picture

HOW DID YOU KNOW?? Crazy bitchez.