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Buffett faults US stress test on banks

SKEPTICAL BILLIONAIRE Warren Buffett criticized the tests of the 19 banks for failing to account for strengths in lenders' business models. SKEPTICAL BILLIONAIRE
Warren Buffett criticized the tests of the 19 banks for failing to account for strengths in lenders' business models.
Reuters / May 4, 2009
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OMAHA, Neb. - Warren Buffett criticized the government's stress tests of 19 large US banks for failing to account for strengths in lenders' business models, and said he would buy more shares of three big banks in the portfolio of his Berkshire Hathaway Inc.

"The question is whether the people conducting tests have a bunch of markers" to write down a variety of assets, requiring new capital, Buffett said. "You get the impression from reading it there will be percentage whacks [at various assets]. That is not a very sophisticated way of looking at it.

"To call those 19 banks too big to fail is wrong," Buffett added.

Most, he said, "would find a home if the FDIC decided to move on them."

Buffett said three banks in which Berkshire already has shares, Wells Fargo & Co, US Bancorp, and M&T Bank Corp., do not need more equity capital and he would buy stock in any of them at current prices.

Wells Fargo, US Bancorp, and SunTrust Banks Inc., another Berkshire holding, are among the banks being tested to gauge whether they need more capital to survive a deep recession. M&T is not being tested.

Buffett said he did not know how the government would handle the stress test disclosures, given that a poor showing could trigger a big stock sell-off.

Warren Buffet criticized the tests of the 19 banks for failing to account for strengths in lenders' business models.

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