Berkshire Stops Insuring Bank Deposits Beyond Federal Guarantees

Berkshire Hathaway is apparently telling one of its subsidiaries, Kansas Bankers Surety Co., to stop insuring bank deposits above the amount guaranteed by the federal government (see WSJ article). The move will prevent banks from offering "bank deposit guaranty bonds," often used as a way to attract the business of wealthy customers. The decision stems from the fact that when banks are acquired, the company purchasing the bank may not take on the larger deposits beyond what is insured by the government, causing potential losses for those companies that have insured these extra deposits. The current move would help Berkshire reduce future losses that may occur as more banks fail or are purchased. Unfortunately, the move also signals worry by Buffett and Berkshire that more bank failures and consolidation could be expected in the future. This is certainly not the news the markets need right now.