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Buffett says most banks aren’t too big to fail
Legendary investor also offers glimpse of Berkshire’s first-quarter earnings
- OMAHA, Nebraska - Billionaire Warren Buffett says most of the banks the U.S. government is evaluating with stress tests are not too big to fail,advertence:.
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Buffett says he’s not sure how the government will handle the situation when the results of the stress tests are released, but he doesn’t think the government should rule out the failure of most of the banks.
Buffett says all but the four biggest banks the government is examining could be sold and should not be considered too big to fail.
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Buffett and Berkshire Hathaway’s vice chairman Charlie Munger held a news conference Sunday a day after 35,000 attended the company’s annual meeting.
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Buffett offered a glimpse into his holding company’s, Berkshire Hathaway Inc., first-quarter earnings Saturday. But the full details, including the company’s net income, won't be available until Friday when the company releases its earnings report.
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Buffett said Berkshire will report a roughly 10 percent drop in its first-quarter operating profit next week.
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Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, and candy companies, restaurants, natural gas and corporate jet firms. Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
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Buffett says Berkshire will report an operating profit of about $1.7 billion in the first quarter. That's down from the $1.9 billion in operating profit Berkshire reported in the same period a year ago.
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Operating profit does not include gains and losses on Berkshire's investments and derivatives, which have had a significant impact on the Omaha-based company's reported profits in recent quarters.
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In 2008, Berkshire recorded a largely unrealized $7.5 billion loss on derivatives and investments that dragged down profit. Berkshire still reported a 2008 profit of $4.99 billion, or $3,224 per Class A share, but that was down 62 percent from the previous year.
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Berkshire's fourth-quarter results were worse. Buffett's company reported net income of $117 million, or $76 per share, down 96 percent from $2.95 billion, or $1,904 per share, in the same period a year earlier.
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Buffett said that in the first quarter, Berkshire's utility and insurance businesses performed fairly well during the quarter. He said insurance underwriting profit should be up slightly because it's not tied to the recession.
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But many of Berkshire's other businesses, such as its jewelry stores, Shaw carpet, Acme Brick and Clayton Homes, have been hurt.
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Berkshire finished the first quarter with $22.7 billion cash. But Buffett said the day after the first quarter ended, Berkshire spent $3 billion of its cash to help Dow Chemical acquire rival chemical company Rohm & Haas. Berkshire made that commitment last summer, but the Dow deal didn't close until April 1.
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That left Berkshire with about $19.7 billion cash.
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More than 35,000 people attended Berkshire's annual meeting Saturday to listen to Buffett and Vice Chairman Charlie Munger answer questions for more than five hours.
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