Bloomberg News

Munger Says Europe Leaders ‘Behind the Curve’ on Debt Crisis

October 24, 2011

(Updates with Munger’s comments on Bank of America in the 10th paragraph.)

Oct. 24 (Bloomberg) -- European leaders, who have directed about $350 billion to aid Greece, Ireland and Portugal, need to do more to resolve the continent’s debt crisis, Berkshire Hathaway Inc. Vice Chairman Charles Munger said.

“They are way behind the curve,” Munger, 87, told Bloomberg Television’s Shivaune Field in an interview today in Los Angeles. “They have to stop shooting at this elephant with a pea shooter.”

Berkshire has cut its holdings of European sovereign debt and Chairman Warren Buffett said last month that his firm wasn’t prepared to invest in the continent’s banks. Munger, who advises Buffett on Berkshire’s investments, praised policy makers in the U.S. for the 2008 bank bailouts. European lenders must turn to investors as they face losses on bond holdings, with nations including Greece struggling to repay debts, Buffett said.

“They need capital in their banks, in many of their banks,” Buffett, who is also Berkshire’s chief executive officer, said in a Sept. 30 interview. “We would not be a good prospect.”

Buffett agreed in August to buy $5 billion of preferred stock in Bank of America Corp. to help the U.S. lender protect against mortgage-related losses and prepare for higher capital requirements. The Charlotte, North Carolina-based bank has lost about half its market value this year as it takes provisions against faulty home loans.

Spain, Italy

European leaders have grappled for months with Greece’s mounting debt, seeking to prevent the crisis from infecting Spain and Italy and tipping the world economy into recession. A plan in March was billed as a “comprehensive” strategy. A July accord on a second bailout for Greece and more powers for a rescue fund was hailed at the time as the “final package, of course,” by Luxembourg Prime Minister Jean-Claude Juncker.

Europe’s leaders are scheduled to meet again on Oct. 26 to try to complete a plan to resolve the debt crisis, after meeting in Brussels over the weekend.

Aid of 256 billion euros ($357 billion) for Greece, Ireland and Portugal has failed to stabilize markets or prevent the turmoil from spreading to France, co-anchor with Germany of the European economy. French bank shares have tumbled on concern they are vulnerable to losses around Europe’s periphery.

Moynihan’s ‘Right Attitude’

Bank of America reported a $6.2 billion third-quarter profit after a net loss of $8.8 billion in the three months ended June 30. CEO Brian T. Moynihan, who took the top job last year, has sold assets and dismantled portions of the company that his predecessor, Kenneth Lewis, built into the biggest U.S. bank. In the third quarter, Bank of America fell to No. 2 behind JPMorgan Chase & Co. among the top U.S. lenders by assets.

“He has the right attitude, back to basics,” Munger said of Moynihan.

Munger attended an event in Los Angeles to mark the opening of a headquarters for Chinese carmaker BYD Co. Berkshire bought stock in Shenzhen-based BYD in 2008 and owned a stake of about 9.9 percent as of Dec. 31. BYD, which is also a battery maker, is a “huge technical leader,” Munger said.

“They’ve just gone from strength to strength,” Munger told reporters.

--Editors: Dan Kraut, Dan Reichl

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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