BUFFETT: Particularly in the last few months, yeah.
BECKY: So what's the end result over the next six months or so?
BUFFETT: Well, ten years from now, Europe will be working fine. But they— they— but the— and they will be consuming more there. They'll— they'll get it worked out. But— but there's no obvious answer. And— and— and that becomes more and more apparent as they go along. And— and like I say, they're— they're— they're trying to put patches on something that's got a lot of leaks.
BECKY: But— patches on something that has a lot of leaks, you could have a lot of different solutions to the end of that. Is the euro still gonna exist ten years from now? Europe will, but will the euro?
BUFFETT: I don't know. I don't know. And I don't think they know. I mean, it— it— it certainly can't exist as originally designed. We've found out that— that trying to have a common monetary unit, when you don't have somewhat common fiscal policies and cultures and work rules and all kinds of things— just doesn’t work. And— and— how they'll— how they'll resolve that is anybody's guess.
BECKY: Obviously, it— it depends on who's in charge, who the leaders are. And the leaders there seem to get voted out every time— a new election comes along. So if there's a constant changing set of players at the table, how— how is there a good solution?
BUFFETT: Yeah, well, I— I— I— I— I— I would not know the solution myself. I mean— Henry Kissinger said a long time ago, you know, "If I want to call Europe, what number do I dial?" And— and, you know, essentially, that's the problem. I mean, they— the— when we had our crisis in 2008, everybody knew the responsibility was on Bernanke and— and Paulson and— and— with the president behind 'em. And— as long as— as long as they knew where they were going, they had the will and the— and— and— and the ability to do things that were needed to do. But exactly who has the ability— when— when you don’t have a printing press, you— it's— it's a different animal.
BECKY: You know, we— we've been watching the headlines— over the last several weeks. And the manipulation of Libor is just the latest in a series of scandals— that has to break down the public's trust in what happens with financial institutions, what happens on Wall Street. What— what do you think about what's happened with Libor and how big of a deal is this?
BUFFETT: Well, it— it— it's a big deal. It's a big deal. I mean, it— you know, you've got the base rate for the whole world— including— including some— loans we have— in the past. And— so— the— the idea that a bunch of traders can— can— start emailing each other or phone each other and— and— play— and play around with that rate is— is an important thing. And— you know, it— it is not good for the system.
BECKY: Does it shake your confidence in the system?
BUFFETT: Well, I— I've got a lot of confidence in the system over time. No, the— our system works. I— you know, we are sitting here in Sun Valley in pretty good circumstances, compared to a couple hundred years ago. So— we're— we're not working any harder than they worked 200 years ago. We're not any smarter. But we— we live far differently. So our— our system works over time. But— but— it sure shakes— (Laughs) it shakes your faith in certain institutions, I'll put it that way. Not the— but not the whole system.
BECKY: I know Andrew's got a question for you, as well.
JOE KERNEN: I just— before Andrew's gonna talk about JPMorgan, I just, Warren, wanted to quickly ask. But— Bob Diamond, very good executive— I know that in the past— you know, we— Goldman had some P.R. and some— you know, some ethics issues. You said— I mean, you wouldn't want— you— I don't think you want— Blankfein to lose his job. I don't know what you wanted to happen with the— the officers at Wal-Mart. And I'm wondering whether you thought that this is an overshoot that— that Diamond is just— unceremoniously dumped. And— you know, he was an American in— in London. And— I mean, would you— don't— wouldn't you rather have him stay, if you were a Barclay's shareholder?
BUFFETT: Well, I'm not a Barclay's shareholder. But I— I don't think he had any choice but to go. When— with something as big as Libor— you know, if it happ— it— and he wasn't in charge of all of Barclay's, at that time. But— but— there are a lot of things that went on in that trading room— that— who knows who was aware of what? And I don't know anything specific about it. But— that was not— that— it was not a rogue trader. Let's put it that way.
JOE: You don't have different opinions based on whether you own shares in the stock, though, right?
BUFFETT: Well, I— no, not on this. But I— I may know less about it.
JOE: Sometimes— sometimes maybe, yeah.
BUFFETT: I haven't foll— I haven't followed Barclay's.
JOE: All right.
ANDREW ROSS SORKIN: Hey Warren—
BUFFETT: You know, at Salomon we had— you know, some problems in— and they had to go.
ANDREW: Warren, talking about trust— and a company that you do own a stock in, JPMorgan— we're gonna hear from Jamie Dimon tomorrow what their earnings are. And we're gonna try to hear some more about what happened to that soured trade. Your views on— on the trade itself? Your confidence in the company? Your confidence in Mr. Dimon?
BUFFETT: Yeah, I— I think Jamie Dimon is one of the best bankers in the world. And— if I had a bank— I— I like John Stumpf a lot too— incidentally, at Wells Fargo. But if— if— if I owned a bank in Omaha and I could get Ja— Jamie to— to run it for me, I would feel very happy. And— no, Jamie— Jamie understands banking. He understands risk. And— and— you know, it was— it's a significant loss. But you l— you— he— J.P. Morgan lost billions and billions and billions of dollars on loans. I mean, if you— if you've got a couple trillion dollar balance sheet, you're gonna have some losses some places.
ANDREW: Do— do you have any different views as a result of this, about the Volcker rule or some of the regulations that are part of Dodd-Frank?
BUFFETT: Well, I— my partner, Charlie Munger is more Old Testament than I am on this. But I— I do think that— I think there are good reasons to restrict the activities that banks can be in.
ANDREW: So the activities that led to these losses, you would preclude JPMorgan from participating in, in the future?
BUFFETT: Well, it— it's— it's hard to say what they— those acti— I mean, if they're truly hedging risks— you know, I— I— there's— there's certainly a lot to be said— if— if you're running a bank and you— you— you want to hedge interest rate risk, hedge foreign exchange risk, I mean, that— that— that's perfectly proper. We do it in our— in our energy companies. We— we have— we have transactions all the time to hedge risks.
So if somebody goes off the reservation and— and starts— turning hedging positions into speculative positions, you know, you may have a problem. But that— that was not policy at JPMorgan. That— you know, that was one fellow's — near as I can ascertain that— that— that went very, very big in a position that was originally designed as a hedge position. And— and then he put a hedge on a hedge and— and— pretty soon he had what they call a Texas hedge.
BECKY: Hey, Warren, can we go back to Libor for a moment, too?
BECKY: You mentioned that you have some contracts and some— some things that are based off of Libor that have been there— I— I'm guessing derivatives and some other things that have been in that?
BUFFETT: Well— yeah, we— we own some auction rate— municipals, for example, that are priced off Libor — a couple billion.
BECKY: So what happens? If— if Libor was manipulated, do you have a case to go back and have a complaint, to have— a lawsuit, to have anything that comes up with any of this?
BUFFETT: Well, I— I think— there certainly will be a bunch of lawyers that will think that. And— and— it— if you can pin down the person that did something to you. And they had— and— there may well be some kind of a case. I mean, we— we bought these securities in the market auction rate. Municipals that have— they're tied to Libor. I have a feeling that in— for any one entity, the amount might be very, very small, but— but it—
BECKY: It's over $3 trillion of things—
BUFFETT: — but it's a huge mark— oh, it's a huge market.
BECKY: — that are priced against this.
BUFFETT: I mean— it— it's— the— the numbers would stagger you.
BECKY: So— how big of a problem could this turn out to be down the road?
BUFFETT: It could turn out to be a big problem. But we don't know what banks did what, at this point. But— but— well, go back to our Salomon experience. You had one fellow with one bo— a couple of bond issues, and— it— that caused a lot of trouble. And— and you get Libor, then you're talking about the whole world.
BECKY: Right. And everybody associated with it.
BUFFETT: Everything is— everything's tied in. And of course, you're in this terrible position, if you— if you have— millions of contracts based on Libor and one side profits from— a given price being out of line, and the other side loses— you're not gonna collect from the fellow that got the benefit. If you're in the middle of the trade, you're just gonna have the people on the losing side of each trade— come after you. So it— it— it's very asymmetrical for the person that's got a bunch of trades on it.
BECKY: Okay, so it could be a potentially huge can of worms.
BUFFETT: It's— it— it is a can of worms.
BECKY: It is a can of worms. (LAUGH)
BUFFETT: I will guarantee. It's— it is a can of worms.
BECKY: Okay. Warren, we're gonna have much more in just a moment. We want to thank you for your time.
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