Warren Buffett: A 'Storm is Brewing' in the Banking Industry

Legendary investor Warren Buffett is warning about a 2.2 trillion dollar storm that is about to strike the banking industry. The consequences of which will likely be felt for years to come. As you are about to see, a problem of this magnitude didn’t form overnight. The origins of this crisis date back more than 40 years. Now, it’s finally too big to ignore. With each passing day, we are getting closer to impact. Listen to Buffett explain.

To truly understand what Buffett is saying, you first need to understand the business model of a bank. At their core, banks are in the business of lending money. On the surface, it seems like a pretty simple business. Banks have money and they lend that money out to people and businesses that need it. The borrower pays the bank back the money, with interest, over time until the loan is paid off in full. The borrower is happy because they got to purchase something they otherwise wouldn’t have been able to afford. The bank is happy because it was able to make money on the loan in the form of interest paid by the borrower.

If you have ever interacted with a bank, you probably understand this part of the banking model first hand. However, the actual loaning of the money is only part of the story. What really matters in understanding Buffett’s warning is how banks even get the money that they loan out in the first place. This is an often hidden aspect of the banking business model that has the potential to make things extremely risky. What I’m about to say may come as a surprise to some people but when banks give out a loan, they actually aren’t lending out their own money.

Topics covered in the video include Warren Buffett, the banking industry, Silicone Valley Bank, regional banks, the banking crisis, real estate, commercial real estate, commercial real estate crash, the housing market, investing, Warren Buffett’s portfolio, and the stock market

[ArashHildeman]

I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Charlotte Miller.

[TimothyS-ti]

The idea of investing a significant sum of money may be both thrilling and intimidating. There is potential for considerable wealth increase with the correct strategy. How can one take advantage of compound interest and potentially grow your retirement savings to about $1M over time?

[bapi]

The banks will not “take a loss”, the politicians will make sure that doesn’t happen. The taxpayer will pay for the losses

[Sky]

Look I can summarize it in one statement. The government is out of money and they're gonna take yours. How's that? How do I do?

[paulpellicano]

Looks like a matress is more secure than a bank vault these days.

[conradkostelecky]

The actual problem started in 1913 when the central bank system was started. Fractional banking and a system built on debt in an ever increasing spiral meant to collapse in time.

[Theresaa]

I'm 49 and earn about £2M ($2.5M) per year and save about 30% in HYSA's. I've been reading a lot of articles mentioning how w0rthless 'cash savings' are in this current unstable economy. D0 you suggest I invst in real estate, stocks or Gold?

[therealzahyra]

The mental gymnastics we humans do to justify made up ones and zeroes representing the social construct that is "money" is IN-SANE.

[debonairbeast]

Not all is factually correct in this video. Banks do not make most money by using deposits to create loans. The biggest source of money for banks comes from fractional reserve system. Banks are required to keep a small % of money they „borrow” from depositors and then borrow that money in close to perpetuity. Google the term and you will understand. The amounts mentioned regarding the upcoming maturity of the commercial real estate loans are big (2.2 trillion) for an average person, but banking system is so complicated that we simply don’t know what the spillover effect to other parts of not just banking sector but also real economy will be. It’s 2008 on steroids bc instead of allowing the banks to pay for their risky business, the government bailed them out with, you guessed it, your money. They will do it again without a doubt. Privatize the profits and socialize the losses.

[MooseHS]

Great presentation... So I will be a better investor by not investing in small and mid size banks and other lenders of commercial real estate but what investment opportunities will this create?

[mattd]

How does one know what banks are more susceptible to this problem. Is that a direct line item available to the public in there income and expense statements ? Would it show much they have is commercial real estate loans.

[anthonym_]

Great video. Illustrations are helpful. Thank you.

[walkabout]

In the world of finance, where fortunes sway,
Warren Buffett speaks, with wisdom's ray.
"A storm is brewing, " his words resound,
In the banking industry, where challenges abound.

With keen insight, he peers ahead,
To the stormy seas, where fears are fed.
For in the currents of economic tide,
Lie the secrets of success and pride.

In the banking halls, where money flows,
Buffett sees the signs, of highs and lows.
Regulation shifts, and technology's rise,
A storm gathers strength, beneath the skies.

Yet amidst the turmoil, Buffett stands tall,
With a steady hand, he faces it all.
For in the eye of the storm, where chaos reigns,
Lie the opportunities, for those with gains.

So let us heed his words, with care,
As we navigate the financial fare.
For in Buffett's wisdom, we may find,
The path to success, in the stormy grind.

[RS-xhrq]

Our family had a business with 650 people. We decided to sell in 2023 as our interest cost went from $3m to $8m. Now we collect interest. Interest was eating our profits.

[humanparaquat]

When you use a source like this cnbc clip of warren buffet, could you please give the date when the interview took place? It will help a lot with putting things in perspective. Great video though once again

[icutoo]

Excellent update and video. Some managers are overly aggressive at creating profits where they use other peoples money and when things go bad in business other people are stuck with the losses. I would expect banks to know better about these schemes but the banks use the same tactics to accept these loans and pass on their losses to others. Like a game of hot potato where the government and eventually the worker/employee are stuck with the higher taxes. A good example of risk aversion. Take the profit and pass on the risk to someone else.

[carltirocchi]

It sounds like a plan by financial concerns, to grab foreclosed real estate at fire sale rates. Is this a reassignment of wealth and assets to the extremely wealthy investment groups?

[fglhkkl]

i dont invest in stock market but do metal detect find lots of silver

[nigelboreham]

Thankyou for such a concise explanation. Thanks to for keeping me awake with the atificial leg.

[michau_]

If bank shut down, then you will lose your money and stocks, it happened before In 2008-2009 in my country (because of USA), many lost their jobs at the same time, business, factories and companies closed down etc.
So it will not just hit the bank, but every one in contact with the bank.