There is widespread panic in the US regional banking sector, with almost 200 banks at risk of failing if half of their depositors withdraw their funds.
Billionaire Warren Buffett, who has a history of helping troubled banks, is reportedly in talks to invest in the regional banking sector and has offered guidance to senior White House officials.
The calls between Buffett and President Biden’s administration have centered around the possibility of him investing in the sector and offering advice to officials on how to weather the storm.
Buffett has previously injected capital into Bank of America and given a $5 billion lifeline to Goldman Sachs Group during the 2008 financial crisis.
The crisis in the banking sector was sparked by soaring interest rates, causing Silicon Valley Bank to collapse and creating a $1.8 billion funding blackhole.
Customers were seen lining up outside the bank branches, hoping to withdraw their funds, prompting Biden’s administration to promise to fully pay out uninsured deposits from failed banks.
In an effort to avoid taxpayers picking up the bill, big US banks voluntarily deposited $30 billion to stabilize First Republic Bank.
However, a new study by the Social Science Research Network found that some 186 banks are subject to the same risks as Silicon Valley Bank, and they would fail if half of their depositors withdrew their funds.
Economists studied the banks’ asset books and found an estimated $2 trillion loss in their market value.
The anonymous sources who spoke to Bloomberg revealed that the calls between Buffett and Biden’s administration have also centered around offering advice to officials about how to avoid a domino effect throughout the banking system.
Representatives for the White House and Berkshire Hathaway have yet to comment.
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