Buffett attacks bank tests

By Jonathan Stempel and Lilla Zuill

OMAHA, Nebraska (Reuters) - Warren Buffett attacked the government's stress tests of 19 large U.S. banks, saying they failed to properly assess the industry's health, and that he would buy more shares in three big banks Berkshire Hathaway (BRKa.N) (BRKb.N) already owns.

The world's second-richest man also said Berkshire, which generates about half its business from insurance, would consider writing policies to insure against a potential swine flu pandemic if it got paid enough.

Buffett and Berkshire Vice Chairman Charlie Munger held a press conference a day after Berkshire's annual meeting, which brought 35,000 shareholders to Omaha to hear the two field questions on the company, the economy, and other matters. The weekend is known as Woodstock for Capitalists.

Three Berkshire holdings, Wells Fargo (WFC.N), U.S. Bancorp (USB.N) and SunTrust Banks (STI.N) are among 19 large banks the U.S. government is stress testing to gauge whether they need more capital to survive a deep recession.

Buffett said Wells Fargo, U.S. Bancorp, and a third Berkshire holding, M&T Bank (MTB.N), do not need more equity capital, and "we would buy stock in any of the three banks at present prices."

He expressed no opinion on SunTrust's capital needs. M&T is not being tested. Berkshire also invests in Bank of America (BAC.N) in a portfolio run by a different executive.

Buffett said the government is taking the wrong approach in assessing banks by ignoring differences in lenders' business models. Wells Fargo, he said, has a different model from Citigroup (C.N), which has had multiple bailouts.

"The question is whether the people conducting tests have a bunch of markers" to write down a variety of assets, requiring new capital, Buffett said. "You get the impression from reading it, there will be percentage whacks (at various assets). That is not a very sophisticated way of looking at it."