Rolfe Winkler
Option ARMageddon
Buffett’s Betrayal
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When I was 14, Warren Buffett wrote me a letter.
It was a response to one I’d sent him, pitching an investment idea. For a kid interested in learning stocks, Buffett was a great role model. His investing style — diligent security analysis, finding competent management, patience — was immediately appealing.
Buffett was kind enough to respond to my letter, thanking me for it and inviting me to his company’s annual meeting. I was hooked. Today, Buffett remains famous for investing The Right Way. He even has a television cartoon in the works, which will groom the next generation of acolytes.
But it turns out much of the story is fiction. A good chunk of his fortune is dependent on taxpayer largess. Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.
Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.
To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. (Click chart to enlarge in new window)
Without FDIC’s debt guarantee program, even impregnable Goldman would have collapsed.
And this excludes the emergency, opaque lending facilities from the Federal Reserve that also helped rescue the big banks. Without all these bailouts, the financial system would have been forced to recapitalize itself.
Banks that couldn’t finance their balance sheets would have sold toxic assets at market prices, and the losses would have wiped out their shareholder’s equity. With $7 billion at stake, Buffett is one of the biggest of these shareholders.
He even traded the bailout, seeking morally hazardous profits in preferred stock and warrants of Goldman and GE because he had “confidence in Congress to do the right thing” — to rescue shareholders in too-big-to-fail financials from the losses that were rightfully theirs to absorb.
Keeping this in mind, I was struck by Buffett’s letter to Berkshire shareholders this year:
“Funders that have access to any sort of government guarantee — banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella — have money costs that are minimal,” he wrote.
“Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that … are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.”
It takes remarkable chutzpah to lobby for bailouts, make trades seeking to profit from them, and then complain that those doing so put you at a disadvantage.
Elsewhere in his letter he laments “atrocious sales practices” in the financial industry, holding up Berkshire subsidiary Clayton Homes as a model of lending rectitude.
Conveniently, he neglects to mention Wells Fargo’s toxic book of home equity loans, American Express’ exploding charge-offs, GE Capital’s awful balance sheet, Bank of America’s disastrous acquisitions of Countrywide and Merrill Lynch, and Goldman Sachs’ reckless trading practices.
And what of Moody’s, the credit-rating agency that enabled lending excesses Buffett criticizes, and in which he’s held a major stake for years? Recently Berkshire cut its stake to 16 percent from 20 percent. Publicly, however, the Oracle of Omaha has been silent.
This is remarkably incongruous for the world’s most famous financial straight-shooter. Few have called him on it, though one notable exception was a good article by Charles Piller in the Sacramento Bee earlier this year.
Buffett didn’t respond to my email seeking a comment.
What saddens me is that Buffett is uniquely positioned to lobby for better public policy, but he’s chosen to spend his considerable political capital protecting his own holdings.
If we learn one lesson from this episode, it’s that banks should carry substantially more capital than may be necessary. You would think Buffett would agree. He has always emphasized investing with a “margin of safety” — so why shouldn’t banks lend with one?
Yet he mocked Tim Geithner’s stress tests, which forced banks to replenish their capital. Why? Is it because his banks are drastically undercapitalized? The more capital they’re forced to raise, the more his stake is diluted.
He points to Wells Fargo’s deposit funding model being more robust than investment banks’, but that’s no excuse for letting tangible equity dwindle to three percent of assets. At that low level, the capital structure would have collapsed were it not for bailouts.
And by the way, the strength of Wells’ funding model is a result of FDIC insurance, among the government subsidies Buffett complains about in this year’s letter.
To me this feels like a betrayal. There’s a reason he’s Warren Buffett and not, say, Carl Icahn.
As Roger Lowenstein wrote in his 1995 biography of Buffett, “Wall Street’s modern financiers got rich by exploiting their control of the public’s money … Buffett shunned this game … In effect, he rediscovered the art of pure capitalism — a cold-blooded sport, but a fair one.”
But there’s nothing fair about Buffett getting a bailout, about exploiting the taxpaying public for his own gain. The naïve 14-year-olds among us thought he was better than this.
What would Ben Graham say?
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Thanks for the article. I have been saying that since september last year when Buffett was making calls to Congress to bail out banks. It is quite pathetic to see Buffett stoop to this level. He looks just like any other operator playing the system, with billions, nothing more.
Rolfe, you are correct in pointing out that many of Buffett’s investments have received bailouts, but I think you do not give enough credit to him for the things he has advocated that are beneficial to the public. His early call on regulating derivatives, staying away from leverage in investments, championing against the abolition of the estate tax, let along the valuable and safe tenants he has applied to make money, all fall on the other side of the scale. The bailouts his investments have received were not his fought or doing. The fact none of his investments went bankrupt inspite of a government bailout (such as AIG or Bear Stearns) is testament to his investing acumen. Your blame is akin to saying Tiger Woods has lost his golf ability because he might have shot 5 over par on a cold, rainy, windy day, which is outside anyone’s control. What you fail to mention is that everyone else shot at least 15 over par given the same climate.
TRAITOR!!! Benedict Buffett
Well said.
Howard, thanks for your comment. It gives me an opportunity to expand my argument.I do give him credit for advocacy. That’s my problem. This just goes to show that even the most pious among us will sacrifice their principles when their own money is at stake.Yeah, Buffett TALKS a lot about derivatives, about leverage, but what does he DO? He trades derivatives and, if I recall correctly, has said he doesn’t want to see more substantial margin requirements.And on leverage, Wells Fargo is one of the most highly levered banks there is. If he’s against leverage, he wouldn’t have spoken against stress tests that were designed to reduce it. He offered some smug line about knowing Wells business better than some bank examiner, but that’s patently false. Has he seen Wells’ term sheets circa 2005? Is he familiar with the kind of toxic loans they were underwriting even before they bought option ARM king Wachovia? I doubt it.And the reason none of his investments went the way of Lehman and Bear has nothing to do with superior fundamentals. Wells, GE, Goldman, Bank of America were all goners if it weren’t for bailouts. People conveniently forget this, now that government rescue facilities have provided the support necessary to boost stocks. But credit markets were closed to them.And I didn’t even mention the accounting shenanigans these guys are playing. Buffett SAYS a lot about accounting integrity, but his businesses are engaged in some very shady number fudgery.And what about the General Re case? Everyone forgets that now too.People give Buffett a free pass because they think, deep down, he really cares about their interests. I think he does too. Just not when they conflict with his own.
It’s one thing to be a hard-nosed, self-interested capitalist which Buffett certainly is. It’s quite another to use a carefully cultivated reputation for moral rectitude to feather your own nest.Though Buffett has done many positive things, it’s about time someone exposed the unquestioning worship of St. Warren for what it is. Well done.
What, exactly, is the meaning of “collateralization” of asset values, in terms of creating tradeable liquidity?
Actually Buffet investing in companies such as GE and Goldman was a vote of confidence for the financial sector if you remember. Buffet probably just negotiated much better financial terms than the US taxpayers got. Who’s fault is that? But yes I’m sure he benefited from the Federal money. And the Federal officials are not protecting the taxpayers sufficiently. They sure be hard-line but everything is all for the banks and the government continues to just give away taxpayer money and not even negotiating in favor of the taxpayers. The banks get all the benefits. Its scandalous in the worst sense.
Besides Goldman and GE Buffet already held positions in most of those companies. Actually Buffet helped Goldman and I almost wish he hadn’t. They don’t deserve it. Actually none of the banks deserve anything they got the Feds just thought it was necessary and after the Fed missed all the warning signals or didn’t care. Did any of them care as long as the ball was rolling? And taxpayers don’t deserve that they have to pay for it. That’s why it still burns me when the execs get millions in pay and bonuses.
Powerful stuff Rolfe. Powerful.
I agree with plenty of this article but not all of it. I agree with your overall point that not enough people talk about some of the toxic loans that Wells Fargo made, or that Goldman got a sweet deal from the bailouts and that Buffett just piggybacked on that. However, two of his huge financial holdings came about after the carnage. His Goldman and G.E. holdings came as a result of his having cash on hand at a good time. Everyone knew they’d get bailed out, Buffett happened to have kept his powder dry and then invested in a high probability event. The back-scratching between i-banks and the Fed churns my stomach as well. Buffett’s right-hand guy Charlie Munger aptly calls it a “daisy-chain of reciprocity.” However, I don’t fault Buffett for investing where he did.On the derivative issue, it does appear, on the surface very silly on Buffett’s part. These derivatives though were so custom-tailored though that they don’t even resemble the type Buffett has railed against in the past. I’d liken them more to an insurance play than an options play. He received a massive premium up front(“float”), and as I understand they are european style exercise not American. They also have a renegotiation feature that resets(at Buffett’s discretion) the exercise price at more favorable terms in exchange for a shorter maturity. Seen in its totality, it was one of the most shrewd, well thought out deals ever crafted.I have no dog in this fight. I myself was pretty shocked at the derivative position, and I’m still surprised at his push for the stimulus bill. I’m more with Jim Rogers who says just let the failures fail. Rogers is the only one i’ve heard even make the connection between this time around and the LTCM disaster a while back. Your man on the street-including Wall Street for that matter-probably doesn’t know the full extent of the rot in AIG. The AIG hubris and the mathematics of a small group there are kind of similar to the LTCM deal. Overall, I don’t side with those who think Buffett is a saint among all humanity, but by Wall Street standards I think he and Munger are in the upper echelons ethics-wise.
While I admire Buffett for the wisdom he has imparted an innumerable number of us throughout the years, I have to agree with Rolfe that Buffett certainly has his hands on more than a few taxpayer dollars. But is that Buffett’s fault, or our governments?
bingo! maybe munger is the man behind the curtain
If Buffett’s a greedy parasite, then all the rich and powerful are greedy parasites. Please bring on the regulators, but make sure there’s somebody or thing there to watch over the regulators. And while we’re at it, let’s “socialize” health care system. The reason the founding fathers created checks and balances in government was because they were smart enough to know that everyone is quite capable of acting selfishly and against the good of society (and quite likely to do so). We seem to have forgotten that and have become a nation of the rich and the dumb Joe-the-plumbers who worship the rich, with the middle class stuck in the well – middle, only knowing what they see on TV.
Interesting perspective but I notice some important details conveniently left out such as:- what were the BH holdings in these companies prior to the meltdown?- what percentage of all BH investible assets does this list equate to? I reviewed the 2008 f/s and see $265+ Billion in assets on the B/S (not all investible), whereas the list in the article gives enormous weight to the $26 billion figure of investments in these companies.- why is it a bad thing for a large shareholder to want their holdings to do well – the TARP money was going to come either way, why not support?More information might add some credibility to the critique.
This story made my day Rolfe. I love seeing that phony exposed for the scum that he is.This monopoly man fascist would be disgraced and embarrassed after this if he wasn’t a psychopath and could feel emotions.WHAT A PHONY!!!I wouldn’t mind these globalist elites nearly as much if they didn’t go around acting like philanthropists all day, while they twist the knife in our back the minute our diligence wains.
This article just further confirms how good a investor he is, not only able to identify opportunities but also able to munipulate the market. truly a great investor.
The “vote of confidence in the financial sector” bit is a flatulent load of drivel. The government and Wall Street tossed that out just like “freedom fries”…bumper sticker garbage is all. At the same time he invested in the banks, his “confidence in the sector” was nothing more than government guarantees of his investment. Call it what it is: when working and lower middle class is helped, it’s called socialism, when billionaires get a handout, it’s considered treachery bordering on treason to even mutter a word. If the financial sector was prosecuted under the RICO act like any group who knowingly cooperates in an illegal scheme, it’d stop. The honest, hard working capitalists would be reassured that they have a chance to compete on a fair field, and the public would be reassured that their nation isn’t being overrun by a thieving and corrupt fifth column.
bingo! i guess munger is the man behind the curtain
Rolfe,While I freely admit this is a mostly uninformed opinion, I think you are tagging Warren too harshly. Certainly he advocated government intervention, but that was not only in his best interest – but in the best interest of everyone.I agree bankers, insurers, mortgage brokers, regulators – etc, should never have allowed the financial system to reach the precarious spot we so unfortunately found ourselves in, but the fact is we were there. The entire financial system was in free-fall the effects of which (even WITH the government programs) are still being felt today.Can you imagine if nothing had been done – if as you say, instead of providing government debt guarantees the authorities allowed all of those institutions to fail?You should not limit your nice chart to direct recipients of government “bailouts” but include all of Berkshire investments (and all of yours & mine), as the entire ship was sinking (not just the financial sector). I would argue that otherwise strong companies that had little to do with the mess would have been dragged into bankruptcy given the freeze in the credit markets. Did that equity deserve to be wiped out as well?Your argument is akin to saying Jimmy Stewart’s charechter was being disingenuous in It’s a Wonderful Life. After all he certainly had an economic stake in the building and loan while advocating that depositors calm down and stem a run on the bank.
Buffet is an insurance man, an art he learned at the foot of his mentor, AIG’s Greenberg. His simple formula was to invest “free money” (premiums) in yield paying stocks and bonds. He never did any “due diligence”, never understood “business models” and so relied on “brand names” like GE, Coke, GS et al. As for “bailouts”, you are correct. For a few months there he was panicked that he would be wiped out ..but for the grace of Geithner, Paulson, and the ….dumb public..and even dumber Congress…
So what’s the difference …Buffett or Madoff – I long suspected their smug and sombre looks are just a cloak. Great expose Rolfe …keep em comin!
wow… exposed the true side of Buffet… the side i didn’t know could existed and wish to be not true…But i’ll rather know the truth than live like a fool, thanks Rolfe
It seems the “vampires” of this civilization have their blood substitute.
The FDIC guarantee is NOT paid for by taxpayers, it is paid for by a premium from BANKS…do your research Rolfe.If you look at what happened as a result of Lehman’s collapse, can you imagine if just 1 or 2 or those companies listed had also failed??? The S&P would still be around 7-800…sure Buffett’s interests went up, but so did every other investor, which will lead to a faster recovery.
The guy accumulates huge wealth, doesn’t lavish it on himself or other individuals, gives it away for charitable distribution?…and he’s the bad guy? Do you think he would support a position that would destroy the US financial system— and the ponzi social security and pension systems we all depend on in the future? Think you guys are more than a little bit off kilter….
It seems to me that Berkshire may have gotten too big to fail for more than one reason.
It is also amazing to me that Goldman Sachs – company Mr. Buffett invested a lot of money in – seems to consistently know what is coming next sooner than anybody else. Could there be another explanation for this other than their sheer briliance?
Rolfe sounds like another whiney media pup who couldn’t get a job on Wall Street. I bet he applied to every WS firm around.Those that can do.Those that can’t write.Rolfe – you write well – you don’t know anything about the reality of managing moneyGene Wiley
Some great points made in the comments section. Thanks all.I take issue with those who suggest his investments in Goldman/GE were some sort of altruistic vote of confidence. He said very clearly at the time that it was a bet the companies would get bailed out.What’s particularly interesting is the timeline. These companies were saved from the grave multiple times. The first time with TARP. And again two months later with FDIC’s TLGP. Folks forget that when TLGP went into effect in late November things had gotten pretty bad. As I note, even Goldman was on the verge of failure. Converting to bank holding company status gave them access to TLGP, which saved them from pretty certain death. The same is true for the banking sector as a whole. Things really were THAT BAD. On that point Buffett is right.But I think it’s wrong to suggest, therefore, that the bailouts were a net positive for the economy. I think we had a remarkable opportunity to recapitalize the financial sector in the early part of this year, after the first two bailouts proved inadequate. All along it’s been clear the banking system suffers from a solvency problem, not a liquidity problem. Shoveling more money at them solves nothing, just allows them to carry busted loans on their books indefinitely. Is this really what we want? A Japanese solution that protects the richest among us from absorbing losses?The government SHOULD have wiped out the equity and forced losses on creditors via debt for equity swaps. Yes, it would have been very messy. But the alternative doesn’t really avoid that outcome in my opinion. Instead we just kick the problem upstairs to a bigger balance sheet, Uncle Sam’s. Want to know how ugly it’s going to be when his balance sheet cracks? A lot worse than if we’d dealt decisively with busted banks.As for my previous comment, in which I referred to accounting fudgery, I didn’t think the point needed elaboration. Why did FASB repeal fair value accounting rules, if not to give banks a break? What about accounting for the massive book of option ARMs on Wells balance sheet? While folks are making minimum payments on those loans, the bank is recognizing billions worth of “deferred interest” as income. All of this income will have to be reversed when option ARMs go toxic on recast. How about all the games banks are playing with commercial loans in order to pretend they’re still “performing” so as to avoid impairments?I should re-emphasize that I don’t dispute Buffett’s ability to make money. He made a great trade on Goldman and GE, no doubt. Just like Bill Gross made a couple billion on the subordinated debt of Fannie, or friends of mine who made thousands investing in Citi credit because they knew the government wouldn’t let ‘em lose a dime. It seems to be that all of these gains were ill-gotten.What bothers me is that Buffett talks out of both sides of his mouth. Out of one side he (very correctly) complains that bailouts are corrosive for the financial system, out of the other side he lobbies for them.
Excellent article….It’s truly disturbing to see how the “too big to fail” even applies to an individual like Buffett. Heaven forbid the “great American capitalist” fail!!! He knew his socalled “bets” were guaranteed to pay off….only wish the rest of us were so lucky!!!
The one thing that jumped out at me regarding Buffett’s “genius”….He was somehow smart enough to not invest in GM and lend them a capitalistic hand…why not? Because Uncle Sam wasn’t on board to guarantee his healthy return…what a PIG!! And please keep talking about the truly horrific bottom line for Wells Fargo…I’m sick of hearing how he’d put all his money into it if he could…Talk about obvious manipulation.
Look at history. the big recessions were caused by people trying to get something for nothing. this recession is no different and Trading derivatives on margin is no different. Eventually the house of cards will come down just like our economy when people tried to get houses without paying for them (with government encouragement and support).Wake up and get America out of this “entitlement mentality” and stopping buying in to the “something for nothing” promises of politicians.We all need to stop expecting free money/healthcare/houses from the government and start asking where the money is eventually going to come from.
Howard, you are very knowledgeable person.I am very impressed that you are very informed.Since, I was kid, my father used to teach me. He used to say my son, there are two sides, listen to both side and scrutinize the matter wisely, you will certainly reach close to the truth. Recent, financial problem is very complicated and dangerous. America heavily depends on foreign debt and confidence is extremely important. I do give thank to Mr.Buffett for his hard work to rebound the American economy.
Warren Buffet calls himself an ‘investor’. Well, an investor takes other people’s money, buy up shares of other people’s labor, and skim deep profit out of other people’s blood. Financial investors, there are far far too many of these greedy quick-buck bastards and parasites in Wall Streets, have never created anything of value, never invented or discovered anything of substance, never moved civilization forward, never contributed a cent worth of meaning and happiness to society.So we have this guy, WB, who somehow has certain magic, who presents an image of a trusty wise man, who delivers amazing ROI while playing the cleanest game in town. Supposedly an investor of the most esteemed kind. What a beautiful TV image.For years I though WB brings a good name to the word ‘investor’. Boy was I wrong. Turns out he is not an investor of any kind at all! He is an ‘operator’. He plays games manipulating the government’s public money for fantastic profits. Just like the big bad CEOs who bought up the politicians like so many heads of cabbage. Just like the Goldman Sucks guy who cries with one hand out for TARP freebie bucks, then suddenly produced incredible profits, and bonus, out of thin air.The triumph of American fascism is now complete. Even Mr Buffet is now part of the gang. Trouble is, with the government already bought off, what will the big corporation ‘investment’ gang buy next? May I suggest Mexico? There is good blood money down there you know.
To “Buffett’s right,” yes the debt guarantee program takes in premiums from banks. But your implication, that somehow that makes the program not a taxpayer subsidy, is just not true. The banks who borrowed from TLGP probably couldn’t get money at any price in private markets when the program was launched. If they could have the spreads would have been huge. The fact that taxpayers have not yet been forced to eat losses on any of this debt is comforting, but doesn’t change the fact that they’re shouldering the risk via an explicit “too-big-to-fail” guarantee.To Mr. Wiley: actually I did the hedge fund thing. Was an analyst for years on the buy side, at a very respectable shop that followed a Buffett-style strategy focused on quality of earnings and cash flows and returns to capital. Even have my CFA charter. I gave it up because I prefer writing.
Wow, gene wiley’s post goes through and mine is moderated. Well, at least he got across some of what I wanted to communicate.Perhaps you confused me with the other Stuart Thiel, the ex-econ prof. and critic of Bush, of polkatz fame (I’d actually love to hear my doppelganger’s opinion on this)? Perhaps you didn’t want to address the issue that you haven’t posted any facts on the matter (your table doesn’t count. It may be accurate, just hardly relevant), just an emotionally stirring attack on someone who seems about as honest as they come in his field. More at issue seems to be your disappointment with reality, endemic in the young.If Buffet had not invested as he had, would the average taxpayer in the US be any better or worse off? Isn’t that what it comes down to?
Rolfe,Nice article but I believe you are being a little bit too harsh on Warren here. It is true that a lot of companies he has invested in would have failed without government assistance. But when only mentioning all of these financial companies that would have failed had it not been for the dozens upon dozens of government programs, you fail to see the big picture. If AIG, BOFA, Goldman, and GE all went under then so too would our whole economy. Companies not even related to the financial industry would have collapsed. As you may recall, had it not been for the government’s commercial paper assistance many companies would have failed due to the failure to issue commercial paper. If the government had not intervened it wouldn’t have only been Buffet’s investments that went under. Walmart, GM, Ford, HP, IBM, Boeing, P & G etc etc would have all been in big trouble. As a previous poster said, the financial system should never have been allowed to reach the point it did, but the fact was, it did. He lobbied for the bailouts not for his own profit, but for the benefit of the American economy as a whole. Obviously if the American economy collapsed so too would his investments, but so too would all of yours and everybody elses.You also mentioned (in your response to another person’s post) that Warren talks about derivatives but yet trades them. The types of derivatives Warren talked down on were highly complex. The types of derivatives he trades in are options, futures, swaps, and other less complex issues.And finally you spoke about some of his companies having poor operations. If you read his annual letters you would see that he generally tries to stay out of the day to day operations of his companies. He becomes an owner and not a manager. He lets the manager of the company manage the business. So it is not as if Warren LET Wells fargo build up huge leverage.So before we are all ready to throw Warren under the bus lets take a step back and think about it a little bit more deeply.
Rolfe,Just want to say “thanks”. Great article. And one editorial comment: I applaud your willingness to criticize an icon. In contrast, though, I’m still angry about the complete obliviousness of the business press to blow the whistle on the home-loan fiasco that went on and on. If you lived in California, and were only 12 years old, you would have recognized that a bubble was being inflated and lending had gone wacko as early as 2004. How is it that no one was willing to shout “fire”? I guess there were too many diners on that gravy train and the watchdogs were asleep.
Notice how Warren always considered derivatives to be nuclear missiles – yet never did anything about them as a shareholder in insurance companies, GE, Goldman, AmEx.Notice how Warren always bashed stock options as shareholder theft but sat on the compensation committees of some of the biggest abusers of options – such as Coke.Notice how Warren is against lower taxes and eliminating the death tax – yet all his insurance companies are funded with tax deferred annuities.Notice how Mr. Tax me more – has an Off Shore reinsurance company where taxes are lower.
The question that needs to be asked and properly answered is the following:How did Buffett legitimately gain control of GEICO at such a young age? GEICO is a government subsidized entity very similar to USAA Insurance. Like Wells Fargo, GEICO has very low cost of capital which gives it a major advantage compared to the competition.GEICO is the platform from which Berkshire Hathaway was built. The government and Buffett are hiding the facts but I do NOT know if we’ll ever be able to peel the union back enough to know what really transpired.What do you think?
Good article, goes to show that Buffett is not as good a trader/investor as he and the media makes himself out to be.
Astonishing, or not, how easily swayed the plebs among us are. This article, justified or not, has provoked a typical array of response by, largely, left-wing anti capitilists. Of course, I could be wrong, but I’ll stick to my first impressions.Many among us, still open-mouthed, reel at the sums of money involved in ‘assisting’ banks in times of need. However, not much emphasis has been placed on the cost to the economy (of the world) had these funds not been made available. Now, I don’t know what that cost might be, but I make a plausable stab in the dark that the economies of this globe may have suffered something akin to an atomic bomb in their own living room. It worries me that this ‘consensus’ of “the bailouts only helped the rich investors” is actually gaining momentum – it only goes to show how ‘sensationalist’ reporting really can get through – rather worrying really.Mr. Buffett, undoubtedly, acting in the interests of his shareholders (nothing wrong with that) took advantage of an opportunity rather than a situation; perhaps he was the only one with cash on the hip to do so?But this is really all about public sentiment and not Warren Buffett. The argument seems to be; I ruined my sterio system whilst hosing my burning house – damn! Now it’ll take me two years to save up for another one. No mention of the fact that it would have taken him three life times to save up for another house, had he not hosed it.Therefor, let’s concentrate our anger on, what, or whom, allowed this proverbial fire to start in the first place and not on the firemen who used their proverbial hose indiscriminately to put it out. Is it a collection of people, or is it the system?
Rolfe,Do you really believe the “bailouts” regarding the financial institutions are going to “crack” Uncle Sam’s balance sheet? The ones on your table that you have taken such exception to? In my opinion, unlike some other spending programs, those government interventions have been and will continue to be profitable, though agree there is wood to chop.This was more than a solvency problem, there was a near indiscriminate crisis of confidence – the credit markets effectively shut down – there was widespread fear. Sure you could say without support many of the solid banks were insolvent, but not because of underlying fundamentals but because of widespread panic and lack of confidence in the system as a whole. Do you really believe that the government’s interventions regarding Goldman simply allowed the institution to carry busted loans? The same institution that paid back the direct investment and is already grossly profitable?Your writing is far too intelligent for me to think that you actually believe what you are writing. Instead I think you are riding a populist wave of anti capitalism that is helping you build debate around your writing – and increase views of your material. Perhaps your coldhearted capitalist mentor from 14 taught you more than you let on…
Excellent start to an expose, but it is only the tip of the iceberg.Finally, someone willing to proclaim, “The Emperor has no clothes!”
Buffett has acknowledged that he will take advantage of the opportunites afforded all of us by government. It would be an injustice to his shareholders if he did not take advantage of legitimate legal opportunities to earn a profit. However, on a personal level he has advocated changing the rules for everyone to create a healthier economy. You must separate Buffett the CEO of Berkshire from the Buffett you watch on CNBC.As a basketball coach you may feel the three point shot is bad for the game, but you don’t tell your sharpshooter to pass up the wide open three. It’s within the rules of the game, and passing up the opportunity to score may be the difference between winning and losing.
hard to believe the venom from so many weak investors;why do the such and such when the lock opportunity is recognized and buffet takes advantage while other investors stand with their thumb up their asses like you flunkys.love my brk.aaaaaa’s
Buffet, Federal Reserve, Goldman Sachs and most of the financial institutions that we know are part of the same network of international bankers. They print money, they give it to themselves to play to legitimize the counterfeiting by Central Banks. The world financial system is mostly a ponzi money laundering scheme.
Even if Buffet did use his influence to nudge the regulators his way, the only thing he gets is that his stature is maintained. I’m fine with people stoking their egos. All of his wealth and stock holdings are already pledged to charity. I would rather the manipulation end up helping charities.
Buffett’s father was in the US House of Representatives, so he already had a head start building government connections. When I first heard this little tidbit, I suspected he was a sham. This article confirms it.
” THERE ARE TWO THINGS YOU SHOULD NEVER SEE IN YOUR LIFETIME, HOW THE MEAT INDUSTRY MAKES IT SAUSAGE AND HOW WARREN BUFFETT MAKES HIS DAILY BREAD!!!! “