Warren Buffett has fessed up to making bad estimates as to the risk of the derivative securities that led to billion-dollar losses at Berkshire Hathaway, according to Reuters. In a letter to the Securities and Exchange Commission, written on June 26 but publicized today, Buffett admitted that his fund has underestimated the attendant risk to those vehicles largely responsible for the recession. Buffett’s letter to the SEC revealed writedowns of $1.8 billion worth of stock investments and $2.7 billion worth of auction-rate and other municipal debt holdings. Buffett remained optimistic as to the long-term stability of the Berkshire derivative contracts, which expire between 2018 and 2028.
Buffett Admits Mistake on Derivatives
A letter to the SEC shows that even the Oracle didn’t fully understand the risks attached to the derivative packages that led to the recession.
August 13, 2009