Berkshire to Stop Insuring Bank Deposits Above FDIC Limit

The CEO of Berkshire Hathaway, Billionaire Warren Buffett, according to WSJ – has told one of its subsidiaries – Kansas Bankers Surety Co., to stop offering “bank deposit guaranty bonds”.

KBS has used the bank deposit guaranty bonds as a tool to attract wealthy customers and help the bank increase and hold large deposits. For many years this program, designed as a selling point, has proven to be very valuable to the bank in terms of keeping and attracting deposits. However, this seems destined to change. Kansas Bankers Surety Co., is notifying about 1,500 banks in more than 30 states that it will no longer offer the bond program.

Berkshire Hathaway Inc., has also instructed its subsidiary to stop insuring bank deposits above the amount guaranteed by the federal government. Two people briefed on the matter, notes the Journal – said the order was made Monday by Mr. Buffett. Mr. Towle however, a senior vice president at KBS, wouldn’t confirm or deny Mr. Buffett’s involvement, calling it “strictly rumor.”

The withdrawal of Mr. Buffett from this insurance market, is certainly no great news for the financial-services industry and its customer. Both parties are trying to reach a level of stabilization (if such a thing is possible considering financials current market conditions) ; a level lost when borrowers began defaulting, banks stopped lending, prompting later on the beginning of the credit crisis.

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About Ron Haruni 1124 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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