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Warren Buffett’s Berkshire Hathaway sells Bank of America for ninth straight day

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Warren Buffett walks the floor ahead of the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, on May 3, 2024.

David A. Grogen | CNBC

Berkshire Hathaway’s selling streak in its big Bank of America stake has extended to nine straight days, suggesting that Warren Buffett is not just trimming the longtime holding.

The Omaha-based conglomerate sold a total of 18.4 million shares of the bank from Thursday to Monday for $767 million at an average price of $41.65, a new regulatory filing late Monday revealed. Over the past nine trading sessions, Berkshire has cut its stake by 71.2 million shares with just more than $3 billion of sales.

After the selling spree, Berkshire still owns 961.6 million shares of BofA with a market value of $39.5 billion. BofA remains Berkshire’s second-largest equity holding after Apple, but if the conglomerate continues to offload those shares, the bank could fall below third-place American Express, currently valued at $37.6 billion.

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Berkshire is still BofA’s largest shareholder with a 12.3% stake. As an owner of more than 10%, Berkshire has two business days to report any transactions, so we won’t know until Thursday if the selling streak continues Tuesday.

Buffett famously bought $5 billion worth of BofA’s preferred stock and warrants in 2011 in the aftermath of the financial crisis, shoring up confidence in the embattled lender struggling with losses tied to subprime mortgages. He converted those warrants in 2017, making Berkshire the largest shareholder in BofA, vowing that it would be a “long, long time” before he would sell.

Berkshire’s cost basis on the BofA position was about $14.15 per share or $14.6 billion as disclosed at the end of 2021. At the end of March, the holding was worth $39.2 billion. BofA closed Monday at $41.09.

The conglomerate could be taking some profits after BofA’s strong run, culminating in a big year this year. The bank stock has rallied 22% in 2024, outperforming the S&P 500′s 14.5% return.

Berkshire is set to release second-quarter earnings Saturday morning, which will also reveal further info on the conglomerate’s biggest holdings.

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Biggest banks planning to sue the Federal Reserve over annual stress tests

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A general view of the Federal Reserve Building in Washington, United States.

Samuel Corum | Anadolu Agency | Getty Images

The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.

The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.

After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”

The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.

While the big banks will likely view the changes as a win, it may be too little too late.

Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.

The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”

However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”

Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.

In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.

CNBC’s Hugh Son contributed to this report.

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