Buffett attacks bank tests, eyes flu pandemic

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Omaha (US): Warren Buffett attacked the government's stress tests of 19 large US banks, saying they failed to properly assess the industry's health, and that he would buy more shares in three big banks Berkshire Hathaway Inc already owns.

The world's second-richest man also said Berkshire, which generates about half its business from insurance, would consider writing policies to insure against a potential swine flu pandemic if it got paid enough.

Buffett and Berkshire Vice Chairman Charlie Munger held a press conference a day after Berkshire's annual meeting, which brought 35,000 shareholders to Omaha to hear the two field questions on the company, the economy, and other matters. The weekend is known as Woodstock for Capitalists.

Three Berkshire holdings, Wells Fargo & Co, US Bancorp and SunTrust Banks Inc are among 19 large banks the US government is stress testing to gauge whether they need more capital to survive a deep recession.

Buffett said Wells Fargo, US Bancorp, and a third Berkshire holding, M&T Bank Corp, do not need more equity capital, and "we would buy stock in any of the three banks at present prices."

He expressed no opinion on SunTrust's capital needs. M&T is not being tested. Berkshire also invests in Bank of America Corp in a portfolio run by a different executive.

Buffett said the government is taking the wrong approach in assessing banks by ignoring differences in lenders' business models. Wells Fargo, he said, has a different model from Citigroup Inc, which has had multiple bailouts.

"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."

Munger added: "This one-size-fits-all reasoning in the case of bank stress tests is very likely to be done poorly."

Buffett nevertheless endorsed government efforts to stabilize the financial system, and that the government would find a home for big banks in trouble.

"There is no reason ever in the United States to have a run on the bank," Buffett said. While equity investors do not deserve protection, Buffett said, "The United States government has demonstrated that whatever it takes is what is going to get done, and they are right to do so."