According to a report in the Wall Street Journal, the CEO of Berkshire Hathaway, Billionaire Warren Buffett, 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 in order to 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 approximately 1,500 banks in more than 30 states that it will no longer offer the bond program.
Berkshire Hathaway Inc. (BRK.A) 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 that Mr. Buffett made the order on Monday. However, Mr. Towle, 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.