Hey guys, it's Sasha Yesterday Warren Buffett said that CEOs and board members of banks who fail at managing their Bank properly should get a kick in the nuts. She won't get that's The Bank in trouble. Both the CEO and the director should suffer. The stockholders of the future shouldn't suffer.

They didn't do anything and it doesn't teach anybody any lessons or anything it teaches. The lesson is that if you run a bank and you screw it up, you still live with, you're still a rich guy and the world goes on. That is not a good lesson. It's not a difficult problem, it's just we've screwed up the answer and we've screwed up the communication of it At the Boxer Hathaway Annual Shareholder Meeting Warren Buffett and Charlie Munger held no punches when they strongly suggested that perhaps the idiots who run at these: Banks the management who make no attempts to manage risk should be held accountable because news has been coming out that First Republic Bank the one that collapsed last week was dishing out mortgages to their mates Rich billionaires at near zero percent interest rates and in some cases on deals that were interest only for as long as 10 years apparently.

John Waldron The president of Goldman Sachs took out one of these mortgages. He got 11.2 million dollars in June 2020. and another board member from Oppenheimer and another partner from Goldman Sachs and the former executive from Stone and a super rich probably they're going to do blah blah blah. All apparently took out multi-million dollar mortgages at stupidly low interest rates over 10 year periods.

So A bunch of the richest people in the world who just happened to work in and around banking got preferential rates on their mortgages and had interest rates that were absurdly low. And the question is, was the management of these Banks Giving out these mortgages out of the kindness of their hearts? Did they set up a charity to help struggling? Goldman Sachs Executives struggling to put a roof over their head? Or are these mortgages the obvious telltale signs of really extremely obvious corruption where you scratch the back of the president of Goldman Sachs and maybe just maybe they scratch yours after? Hmm. The executives of these banks have become so greedy that they don't even try to hide it. It's all out there in plain sight because they know that when the hits the fan when everything comes out, exactly nothing will happen to them after the financial crash in 2008.

No, Executives have failed Banks were prosecuted and exactly the same thing is happening again in 2023. Taking obscene risks and being corrupt as is totally okay because if it ever comes out and if the bank collapses, the board members get to keep their Villas They get to keep their bank accounts. They get to become the chairman of the FED because yes, in 1993, a certain Jerome Powell became the managing director of Bankers Trust And. While he was in charge, the bank took on massive risks with derivative trades which lost their clients a ridiculous amount of money.

and in 1995 he was basically fired by the bank for being really at his job presumably. Procter and Gamble sued Bankers Trust because the bank managed to lose around 200 million dollars off Procter Gamble's money in two separate trading fuck-ups and in 1996, Brochure and Gamble won most of that money back in court. But hey, that's water under a bridge. What's the big deal with being in charge of the bank that loses your customers a load of money Because you took extreme amounts of risk? Because of course, just 15 years later, in 2011, Jerome Powell was nominated to the Federal Reserve Board of Governors by Barack Obama Six years after that, Donald Trump promoted power to become the chair of the FED.

He immediately proceeded to deregulate small Banks and allow smaller Regional Banks to take on more risk and do more business in venture capital. And wouldn't you know it? just three years after that happened, four Regional Banks who did a load of business with Venture Capital collapsed because they didn't do any risk management yesterday. Charlie Munger said that the banks have gone too far in chasing greed. Well, I'm so old-fashioned that I kind of liked it better when Banks didn't do investment banking and just when I thought he couldn't possibly put it better, he said this: I don't think having a bunch of Bankers all of them were trying to get rich leads to good things.

but I I think a banker should be more like an engineer. He's more like into avoiding trouble than he is getting rich. Yeah, and they could do fine. They they can do fine that way.

and I think we had a big mistake when we get a bank where everybody who joins the plans to get rich yeah, it's a it's a contradiction and values and I completely agree. My first job after University was working for a bank I did math and I went to a good University Oxford And at the time, if you were an ambitious young graduate doing something like that, you went and worked for a bank because that's where you could make money. I Know today things are different, but back then, a banker was a bit like being a tick tock dancer or a cross-dressing influencer. Everyone wanted to do it and you could apparently make quite a good living doing it.

People went into banking for the wrong reason. Nobody who went to work in a bank actually thought hey, I would love nothing more than to sit there learning how to build valuation models in Excel or make pretty PowerPoint charts all day every day because that's what you end up doing. Banking is a service industry. It is a collective place to store your money and get basic services like loans.

But history shows that people running the banks inevitably get greedy. They sit there with big piles of cash in the vault and the thought is, if you could just make a few percent income on all of that money, you could become stupid. Rich So the bankers begin taking their customers money and lending it out and charging interest. The customers whose money it is that's being lent out are paid 0.4 interest in their savings account.

And it is the bankers who have no business whatsoever making this money out of thin air. They get to profit most of the time. It works out okay because things just keep ticking over. But if you take on too much risk or something happens that you didn't anticipate and your bank collapses, do not worry, the government will come in.

They will make everything okay. They'll guarantee everyone's deposits. They will tell the shareholders the bank that they are and their Investments are now worth nothing. The shareholders of course didn't actually do anything wrong as Warren Buffett points out.

but public opinion doesn't like shareholders. They're apparently the greedy one. So if you have to screw someone over, that is an easy way out. But you know the guy who was making the obscene amounts of money while the going was good.

The management of the bank though. those guys get to get off scot-free because the banking industry is not interested in Prosecuting one of their own, Gary Gensler the guy who's the chair of the Securities and Exchange Commission whose job it is to prosecute these people used to work at Goldman Sachs And yes, The Regulators should have industry experience. But if on the back of that industry experience, the regulator does nothing. When there is blatant malpractice right out in the open, you begin asking certain questions.

Before Jordan Powell became the chair of the Federal Reserve, the post was held by Janet Yellen who is now the U.S Secretary of the Treasury. And while Jordan Powell had a dodgy career before becoming chair of the FED Janet Yellen had never worked in a bank. She is a lifelong academic and politician. She got a PhD from Yale and tours at Harvard and UC Berkeley.

And she's obviously very smart. But how does someone who has never worked a day in a bank get to become the chair of the Federal Reserve Bank? It's a serious question, teaching economics at universities all fine and dandy. But perhaps the reason the banks have been able to do whatever the they want is because they know that they can get away with it. They know that nobody's going to do anything before Janet Yellen The chair of the Fed was Ben Bernanke who also never worked in a bank.

He taught at Stanford New York University in Princeton and went straight from teaching economics at Princeton to be on the board of governess for the Fed. So perhaps it is not all that surprising that after the FED reduced rates to zero percent after the financial crash, they never bothered increasing them back. They didn't know what they should be doing because the people running the show have only ever worked in Academia and haven't seen from the inside what actual banking actually looks like. they haven't seen firsthand the greed that drives the banking sector.

They haven't seen the dirt in the industry that they are then supposed to oversee and manage. So I guess it shouldn't be a surprise that if the people running the FED have either got no extra experience working in banking or have experience of being fired from a bank for being so at their job. I Guess that kind of explains a lot of things. You know who does know a thing or two about banking Warren Buffett and Charlie Munger If you follow sound banking methods, which means you're not doing some things that other people do, huh? a bank could be a perfectly decent investment.

In fact, Charlie and I was me. Originally, in 1969, we bought a bank at Berkshire and we had 19 million dollars invested in that bank and we had 17 million I think invested in our insurance companies. And if the banking holding company Act of 1970 hadn't been passed, we might have ended up owning a lot of banks instead of a lot of insurance companies. They actually owned a bank way back when before regulations forced them to sell and they still own a big chunk of Bank of America as shareholders.

I I Am deeply distrustful situations in which everybody wants to get rich and envies everybody else. I Regard that atmosphere is utterly toxic. so the guys who do know a thing or two about Banking and are not incentivized to keep the status quo are not incentivized to not speak up about it because they're not greedy like the rest of them seem to share my opinion. Warren Buffett might be 92 and Monger is 99, but these guys make way more sense on all of this than the entire U.S banking industry put together.

It's just a shame that the whole system is so corrupt, is so endemically and inept that even though this stuff is so incredibly obvious, nothing is going to change.