Berkshire Hathaway Vice Chairman Charlie Munger is raising multiple red flags over the state of U.S. banking, warning that financial institutions are “full of” what he said claimed are “bad loans” from the commercial real estate sector.
In an interview this weekend with the Financial Times, the 99-year-old investor and trusted second-in-command to Warren Buffett acknowledged the severity of the situation but claimed it was not at a historic proportion.
“It’s not nearly as bad as it was in 2008,” he said. “But trouble happens to banking just like trouble happens everywhere else. In the good times you get into bad habits – when bad times come, they lose too much.”
Munger claimed that “Berkshire has made some bank investments that worked out very well for us. We’ve had some disappointment in banks, too. It’s not that damned easy to run a bank intelligently, there are a lot of temptations to do the wrong thing.”
However, he insisted the commercial property loans in today’s bank portfolios is the proverbial recipe for disaster.
“A lot of real estate isn’t so good anymore,” Munger continued. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there … Every bank in the country is way tighter on real estate loans today than they were six months ago. They all seem [to be] too much trouble.”
Munger also had harsh words for his fellow investors, complaining that “glut of investment managers that’s bad for the country” while declaring many of them were “fortune tellers or astrologers who are dragging money out of their clients’ accounts, which [is] not being earned by any useful service … There’s too much private equity, too many buyers of all kinds – it’s making it a very tough game for everybody.”
Photo by Nick Webb / Flickr Creative Commons
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