Warren Buffett criticized the government's stress tests of 19 large U.S. 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 at a press conference. 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
He expressed no opinion on the capital needs of another Berkshire holding, SunTrust Banks Inc
Wells Fargo, U.S. Bancorp and SunTrust are among the banks being tested to gauge whether they need more capital to survive a deep recession. M&T is not being tested.
There are very different business models, Buffett said. Wells Fargo has a dramatically different business model than the three other largest banks. They will make money under circumstances where the other banks will not. US Bank has one of the strongest non-net interest income based business models around.
Buffett said he did not know how the government would handle the stress test disclosures, given that a bank's poor showing could trigger a big selloff in its shares -- and given the backing that the government has shown for many banks.
It's a somewhat awkward position to be in, Buffett said.
Berkshire Vice Chairman Charlie Munger, also at the press conference, added: This one-size-fits-all reasoning in the case of bank stress tests is very likely to be done poorly.
(Reporting by Jonathan Stempel and Lilla Zuill, editing by Maureen Bavdek, Leslie Gevirtz)