Federal Reserve is Investigating Berkshire Hathaway

Warren Buffet is among the greatest investors ever. On a regular basis, he invests by acquiring stakes in various businesses via his company, Berkshire Hathaway. Class “A” share of this company presently costs over $200,000 on the market.

But, Buffet’s stellar record is now questioned. The Federal Reserve, Fortune reports, is currently looking into Berkshire’s ownership of Wells Fargo. Buffet’s company now holds more than a 10% stake in this bank, so the Federal Reserve wants to check whether loans made by the bank to Berkshire’s subsidiaries were proper.

The concerns were raised after Buffet wanted to increase the ownership stake in Wells Fargo by buying back more shares.

The regulators are wary of ties between non-financial companies and banks. There are rules as to how much these banks can lend to their stakeholders. The Federal Reserve has 60 days to review the ties and dealings between Berkshire Hathaway and Wells Fargo.

There was a similar case involving Buffet’s company and the Feds back in 1990s. At that time, Berkshire had more than a 10% stake in American Express. At that time, he promised to stay passive rather than get involved in American Express’ dealings on an active basis.

Also, in 2010, investigators looked into General Re, another Berkshire’s holding. In fact, SEC had charged General Re of manipulating its financial returns. The company paid more than $12 million to settle the charges.