Buffett’s Betrayal

August 4, 2009

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)

buffett-bailout2

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?

Comments

ROLFE’S the MAN! Good work. Capitalist America, wtf. Rich people and rich people and rich people and rich people get bailout from the cents & pennies & blood of beggar citizens. What a bailout, now we are in for a REAL inflation push RECOVERY!!! People without jobs, paying higher utilities and gasoline? Bullshit! Happily bankers and players with their new-found wealth from the market rally spend!Oh!!!! Federal reserves opinion: When rich people become richer, they can spend, and it create jobs for us to serve them, isn’t it great? E.g. A borrower using our money, and orders us what to do because they are “TOO BIG TO FAIL”, and held US at ransom!!!!!!!!!!!! Rich people become richer, “US”, we become slaves in seek for a decent living. Isn’t this communism? Forgive me, our black brothers, but our president has chosen a team of fraudsters, because the government is a team of fraudsters. Wealth of a nation, is what our forefathers leave for all of us in equal opportunity. Why born a slave? Are we enslaving ourselves? Why are we leading our wealth to bastards on Wall Street to let them spend on $200 pizzas, for us to serve? Why can’t we eat the pizza for them to serve? Is it because they are smarter? Does the policies favor US? This country my friends, have become crooked. I don’t even know if this article will be published, cos the people up “there” are looking after US! God heavens, god save us, America!

Posted by Die a beggger | Report as abusive
 

The only thing you can ever count on people to do is to be themselves. They will never lie to you. Eventually their actions indicate the thoughts that guide them. Buffet is a human being and nothing more. The only real problem here is that he did what many felt was in very poor taste. He represented himself to be of certain opinions in public while acting contrary to those opinions in private. Or to put it another way, he’s being a bit of a hypocrite.It shouldn’t surprise anyone though. He’s got his own interests to secure if he wants to continue living comfortably. It is perhaps a bit sad that his principles appear to have given way to more practical concerns. But at least now a fuller understanding of his character has come to light. Hopefully he won’t be worshiped quite so much.But in fairness. His message of a sound simple investing model has a great deal of value. In the end he’s not a bad man. He’s just a man. And he’s going to look out for himself first.

 

wow i see a lot of bitter folks around herethis again prove hes one of the smartest investorand i can’t believe some of you are calling him a scum or madoffmust i remind you all of you how much charity work he does?i can’t believe this article made the front pagewhile it brings very bring insight, the author’s language is disgusting and hateful

Posted by Justin | Report as abusive
 

I guess the fact that Warren Buffet is leaving the bulk of the money he has earned to charity makes the whole thing easier to digest. I think this is all a big game to him and he is at the top of the leader board. If the rules allow him to take advantage of government subsidies, why not.

Posted by Willard | Report as abusive
 

People need idol. What I know is till now, nobody did better than him.

Posted by Nan | Report as abusive
 

Great article Mr. Winkler! Please do get back to your readers if you recieve any sort of response from Mr. Buffett or his representatives.Also, could you please comment and hopefully blog on Mr. Buffett’s insurance investments. I am no finance wiz, but I do find that aspect of his investments very interesting. One of my lecturers mentioned how Buffett was able to make a huge profit after buying up insurance after Hurricane Katrina. Could you elaborate on that please? Look forward to hearing from you.

Posted by TheObserver | Report as abusive
 

After reading of this writers column, pained to recollect of Buffet betrayal to Americans.No civilized human beings will do such bad actsHereafter,Americans will show much maturity for future investments.This is a drawing lessons to all future investors.

 

Why don’t you put Buffet’s ownership of Moody’s in this context? Then we are talking, for instance about massive conflicts of interest.

Posted by Hugo | Report as abusive
 

This response it a bit off topic.I’m new to investing, so feel free to enlighten me.It seems to me that this general reduction in price value of equities markets (DJIA 9,200) which has brought the PE average down to a more reasonable number, is going to allow for a new speculative market (bubble) to occur. Those who didn’t lose their shirts on the way down can now ride the US bull market all over again, as if it were the start of ’97–and in so doing make twice as much(?). And now that a lot of de-leveraging has occurred, investors can have more confidence by telling themselves that the price of a share is “fairer” and not too inflated. So, it seems to me that these are great times for investing.~My two cents on WB. Buffet, has adopted a guise as an ethical and conservative investor, but really he is just as moral or immoral as the rest of us. This recession has exposed him fairly well. It would be naive to think that he is not a shark. Yes, he probably would not sell the US into a depression but neither would most of us. I wouldn’t invest in BH at this point in time but I still follow his moves.RW

Posted by rowan wood | Report as abusive
 

RolfeWell done!Buffets has also commenced trading in CDS swaps while at the same time calling them “weapons of financial destruction” (guess it depends on who gets destroyed)He has also taken the ludicrous position the not only are these “stimulus packages” a good idea but that we need much much more of them.Buffet and Munger have veered off the high ground and into the ditchZap

Posted by Zap | Report as abusive
 

Banks do not pay for the FDIC premiums, people who usethe bank’s services do. You ever wonder why it cost 3.00for an AMT withdrawl. So, I guess the one postingunder “Buffet’s Right” should do his/her homework. Yousee, the taxpayer ultimately pays for all the mistakes.The method in which these payments are gained are ascrafty as the very people who run the the Fed, Sec, FDIC,Treasury, GS, WFC, MS, ect… These people are comingfrom a perspective of entitlement that most averageinvestors cannot grasp. They control the media, gov,educational institutions, and any other center ofinfluence where the necessity of positive public opinioncan be created. Their main goal is to preserve theirown wealth at all costs; regardless of method. Theonly thing needed is your consent. An by Joe, they gotit. And if they did not, then check to see how yourcongressman voted for the bailout, and hold themaccountable.Essentially, I think that Rolfe’s main argument centerson the idea that Buffett is no different than theothers, in that, the illusion that these institutionscreate to justify their legitimacy have been exposed forwhat they are: Greedy Parasites. As Rolfe stated atthe opening about writing to Buffett when he was 14, youcannot escape the idea that a now older man has becomedisappointed by someone he once held in high regard.It was the illusion that Buffett has projected over theyears that is coming into question, just as thoseinstitutions that we have grown to trust during our lifehave disappointed us. In the words of Ma Joad, in “TheGrapes of Wrath”, she said “we got nothing to trust”.For me, this is the most severe indictment these peoplecan get. I guess it is up to each of us to do our partto shout our dissatisfaction.

Posted by RP | Report as abusive
 

“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..”Moral hazard investing at its finest, by the way did everyone really “know” certainly down at Goldman they “knew” what with their cozy relationship with the Fed, after all weren’t Goldman and Morgan original Federal Reserve “shareholders”….Moral hazard, insider information”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.”ALL CDS Swap positions should be FLATTENED..who cares if Buffett made a shrewd play…he legitimizes the derivatives market by playing in it.Moodys, bailouts, derivatives, shilling for quantitative easing and more stimulus…..like I said, right from the high grouund and permanently into the ditch with the rest of the cheap bankster crooks.Zap

Posted by Zap | Report as abusive
 

This piece completely misses the point. His holdings are sufficiently diversified into a multitude of activities. He would still have a great track record if all his bank holdings had gone to zero. His bank holdings are $26bn and his book is four or five times that ammount and his leverage is negligible. He is a genius and any rational investor would seek government support when it is on offer. More to the point his larger holdings, such as Goldman and GE, were purchased post distress not before so has was part of the solution not the problem. He is a hands off manager and lets the magagement get on with it. These holdings are all minority stakes so why would he be privvy to operational detail? Buffett has been warning of financial excess for years so to suggest he is the bad guy is just wrong. The 14 year old still has a powerful role model to look up to.

Posted by Charlie | Report as abusive
 

“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”Hey Gene,Where ya been man,in a cave, don’t you mean MISMANAGING money?Im sure Rolfe here could mismanage money with the best of them, perhaps the problem is he hasn’t learned to STEAL.Zap

Posted by Zap | Report as abusive
 

Don’t worry, Buffet is already bankrupt and disgraced so he will get what’s coming to him. Accounting gimmicks are all that is keeping his charade of a company afloat. The derivitives have destroyed all his wealth and the wealth of his company and soon the market will reveal that Berkshire is swimming naked!:))

Posted by kyle | Report as abusive
 

good article Rolfe – well donethere are 2 sides to every coin. but the facts remain simple: US Taxpayers bailed out the financial system, and now US Taxpayers will stomach the bill for the next 50 years (how much debt does your government really have outstanding if one includes bail-out funding, future bank recapitalization requirements once CRE and corporate defaults hit the roof, social security spending and the higher interest-payment burden?)on the other hand, GS decides to pay $2bn to the taxman and hold over $6bn for employee bonusesAIG – well let’s not even talk about the bonuses there…ok so your average middle-class/working-class taxpayer may lose their home when interest rates reprice due to higher Govt bond issuance demands, and will probably lose their job when their employer goes bankrupt because of economic factors…but hey, its all ok, ‘cos we saved Wall Street’…. and ensured they still got their bonuses..’

Posted by ernie | Report as abusive
 

Anyone remember the photo of Buffett with Lord Rothschild and the Governator?Google “Rothschild, Buffett, Schwarzenegger, image” if you’ve never seen it. Tells you all you need to know about money and power.Maybe he had a good set of working financial principles, but he also rode a generationally-long bull market. Until it stopped. Now he has to get down and dirty in full view. Mind you, I’ve long suspected that there’s a darker history waiting to be written about kindly Uncle Warren.

Posted by Bear of Little Brain | Report as abusive
 

Finance is a dirty business. There is no two ways about it. Buffet has played it well and has used his winnings for very positive things.Just because Buffet has spoken out against things like derivatives and turns around and uses them to his advantage while he can does not make him evil in the least. He recognizes they are a tool, a very dangerous one,but he CAN use it wisely. He would prefer the tool not be there but while it is he will use it better than the other guy.When will every American realize that ALL of us are only wealthy because of government largesse, EVERY SINGLE ONE OF US. The convoluted, hard to love, easy to mock government has GIVEN us all, in one way or another, all our wealth.Either by defending us abroad, protecting property here, keeping money supply flowing, creating corporations that can be treated as individuals or any number of other things, we ARE wealthy because of our government.We are not more intelligent than the Chinese, more industrious than the Vietnamese or more anything else than any number of cultures. We are successful because of our government. Period

Posted by Greg | Report as abusive
 

To be fair, wasn’t most of his purchases of these companies made after their stock prices were crushed? And after some of these were already at the government feed mill? I think the article is unjustly critical.

Posted by c aberle | Report as abusive
 

I am amazed at the excellent analysis. Greed is the mark of the capitalist breed. It seems he fits perfectly in to that definition. His concern for public policy extends only when it adds something to his coffers.

Posted by J Hyde | Report as abusive
 

A very interesting article. This is the first I’ve ever seen criticizing Buffett, who frankly has always seemed to deserve nothing but praise.The actions and behavior you report here are not praiseworthy, and, until now, I would have thought, not “Buffett-like.”Thank you.Robert EllerMilan, Italy

Posted by Robert Henry Eller | Report as abusive
 

call a spade a spade. well done.

 

While yes, he probably dealt in Pure capitalism…I’d say oh, when he first started, the Capitalism that we have is not capitalism, or he’d not have a say or atleast so Obvious, because he owns so many shares of Corporations 27%? That’s more like another example of What corporate Lobbying is doing to this country. How he’s entitled to have a say more so than a Proffessor of Economics with little to no stake except reputation…I will never understand. Super Star advice is usually Stupid Star advice imho.

Posted by sarah | Report as abusive
 

I hope Buffet reads this. The man has lost a part of who he was- his trustworthiness. He has joined the ranks of Goldman. Its a shame we have chronic ADD in this country, as 3 years from now few will remember the events that have transpired. The wealth of media (24/7) exacerbates this.

Posted by Matt T | Report as abusive
 

Gosh, and to think Obama and his campaign seeked WB’s advice when the economy tanked last Fall. Didn’t they know he was evil?

Posted by Carol | Report as abusive
 

This is very sloppy and dishonest.While playing up Berkshire’s holdings in bailout-recipient companies, nowhere in the entire article do you bother to compare those to, or even mention, Berkshire’s total market capitalization. As of this morning, that stands at $157.5B – of which its holdings in bailed-out companies represent only 16.5%. Obviously, Berkhshire – and Buffet personally – are affected by the fortunes of those companies, but in only minimal degree compared to their other financial interests. Obviously also, a player of Buffet’s stature simply cannot avoid influencing the market in which he himself participates – there’s nothing he can do that does not result in some indirect influence on his own holdings, whether or not he intends it. (If he were to dump these holdings to render himself pure in your eyes, surely that would be worse not only for himself but everyone else as well.)Likewise, you criticize him both for speaking in favor of the bailout for some companies, and for not speaking out against companies that are at fault in the financial collapse, when he owns stock in both groups.And your criticism that he invested in companies expected to rebound in the upcoming financial recovery is perverse: isn’t this what we want people to do? Isn’t this exactly what is necessary to make a recovery possible? You may regard the bailouts as an example of moral hazard, but, given that they are occurring, isn’t it both financially prudent and civic-minded to invest in the economic recovery they make possible? Do you really advocate shunning companies whose market value is increasing as a result of the bailouts and other recovery programs – thereby hampering the recovery – just to be innocent of “moral hazard”?What can Buffet possibly do that would not not come in for your across-the-board and disproportionate criticism? And on what basis do your criticisms rest, given that they seem to consist of advocating (on other people’s parts) the deliberate avoidance of financial profit in a rising market simply because you don’t like the policies that make it rise – hardly a sound business strategy, however resentfully virtuous it makes you feel.

 

Keith writes: “Likewise, you criticize him both for speaking in favor of the bailout for some companies, and for not speaking out against companies that are at fault in the financial collapse, when he owns stock in both groups.”Yes, both behavior is bad and self serving. What is your problem with criticism of it?

Posted by Erich Riesenberg | Report as abusive
 

Rolfe,Looks like you are picking on Buffet just because it will get you more blog traffic. Sensationalist writing always does, as a journalist you’d know that.If you were in Buffet’s shoes last October, and GS came to you for cash (since you are the only one in town with ready cash), would you have said ‘No thank you. Since you are getting tax-payer dollars and will profit from it, I cannot lend you the money’.I didn’t think so. Following Buffet’s investment philosophy would tell you that this is exactly the kind of situation for which he keeps his cash.Let’s all look at the bigger picture. Buffet did not play any part in causing the problem; in fact he warned about ‘Financial Weapons of Mass Destruction’ long before the crisis developed; he put his weight behind the govt actions later because otherwise there would be financial mayhem globally, never mind his own investments. His investments benefitted, but so did the investments of thousands of other investors in large and small companies who would have collapsed had the govt not stepped in.Some factual errors: 1) The deposit insurance is financed from member-bank premiums, not the taxpayer. Of course there is an implicit govt guarantee, as there is for many firms these days (Citi, GS, Fannie, GM, etc). The debt guarantee is a separate facility, offered by the Fed after this crisis happened, which one can say is straight taxpayer money. A debt guarantee is different from deposit insurance.2) Buffet has not said he is against all derivatives. He uses options and futures extensively. He is against the kind of opaque, complex derivatives derivatives that even a financial expert could not see through, like CDOs, which he described as WFMD.

Posted by pandu | Report as abusive
 

This is the redistribution of wealth that we heard President Obama talking so much about before the election. Robinhood in reverse “Take from the poor and give to the rich.”

Posted by Gary Bailey | Report as abusive
 

Kevin also writes: “You may regard the bailouts as an example of moral hazard, but, given that they are occurring, isn’t it both financially prudent and civic-minded to invest in the economic recovery they make possible?”How does propping up failed companies help the economy? How does making bad investors whole on the taxpayer dole benefit society? How is calling Goldman a bank and giving it access to the Treasury, Fed and FDIC a noble act?Were you around when the Fed started the housing bubble? That did not turn out well. Trying to do it again strikes many people as odd.

Posted by Erich Riesenberg | Report as abusive
 

When Republican Millionairs do this it’s Greed, When Democrat Millionairs do what Buffett is doing it’s for the people…….Almost like the tried and true line ALL politicians use “It’s for the Children”….Buffett = Greed

Posted by Civil War Starts Jan 21 09 | Report as abusive
 

Dear community, and I say to all of you the very nieve. What were you expecting, do you not know that our most eloquent citizens have done the same. History tells us that this is not new, our country was formed in this mentality, the one were if you are slick, astute, and asimilate a fox, you can ride the tide for many years. The sad part is that we will sweep the information under the rug and continue as if Mr. buffets wisdom was that of a superior being, when in fact the truth says otherwise. There will be more of this kind and life goes on. We dont have the courage to call a crook by his birth name. at least not here in our country

Posted by rgp | Report as abusive
 

Rolfe, seriously? I see where you are coming from but you are a little bit of what you preach against as your article lacks objectivity. It is a little presumtious and possibly disingenous to say Buffet’s push for the bailouts was for self interest and not for the fact that it made simple economic sense. O.K so he had enough cash on hand to profit from the opportunities that were available at the time, who wouldn’t? Thats his job. Your premis is, he should have foregone the investment opportunities based on principle. Well in the world of capitalism that is equivilent to being mentally retarded.On your point about about solvency and liquidity.-Yes you are right, banks needed to be solvent and increased liquidity infussion did not solve that problem.The issue here is there was an even greater and possibly catastrophic problem. There was a need for Short term capital within the economy and the economy as whole could not just wait arround for banks to slowly become solvent while SMALL BUSINESSES went under. Hence the government had to pump in cash so as to meet the demand for credit by businesses.Your whole article criticizes Buffet based on principles but lacks depth as to how the alternatives you suggestt would have affected the common man…like me, UNEMPLOYED.Lets spare the self righteousness and consider the big picture.

 

A businessman playing the game doesn’t worry me so much, what get’s up my nose is the politicians who roll over for the few at the cost to the many. The politicians need to remember that they are there to represent the people, not a handful of wealthy businessmen and women. There is of course a balance to be had as the business community is vital to the overall health of the economy, but for my understatement of the day, that balance seems to have been lost.

Posted by Peter H | Report as abusive
 

Buffet has an obligation to do what’s best for his shareholders, even if he benefits in the process.

Posted by Logical | Report as abusive
 

I don’t agree with you, because even though 26 billion is a lot of money, it isn’t a lot of money for Berkshire Hathaway. You aren’t putting the amount in perspective compared to his other holdings and assets.

Posted by C | Report as abusive
 

Well done! Clearly and concisely explained. One more myth/bubble punctured.

Posted by Albert | Report as abusive
 

A company is in business to make money.

Posted by Kevin | Report as abusive
 

Your article is nothing more than guilt by association. Many Americans own stock from companies that received a bailout, but that does not make them responsible. Does your investment portfolio have stock from any of those companies?You will certainly sell all of the stock that you currently own in each of those companies in order to remain consistent with the “moral high ground” that you claim in this article. How are you any better than Buffett?Also, it is far easier to pull someone off of a hill than it is to climb to the top yourself. There is a reason that Buffett is worth billions of dollars. He is worth billions of dollars because he is a man of action who is willing to take risks.

Posted by Robert | Report as abusive
 

“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.”The fear was because of the solvency problem. Oh sure, we could go through life happily thinking those pieces of paper in our wallets mean something, simply because they have fancy ink and a government imprimatur.Even now we talk about how much we borrowed from China, so we really didn’t just print more.And yet, some of you seem to have forgotten all the analysis from years past that that is effectively what China does.Instead of printing more out of fiat, we’re playing the shell game and outsourcing the lie.I’m a born and bred capitalist.I’m just not blind, deaf, and dumb.Nor am I particularly inclined to subsidize anyone. So some of you (supposed capitalists) can whine “The whole world would have imploded. Billions lose their jobs” and I’ll look at you and say very clearly “stay out of my wallet, hippie.”I especially don’t want to subsidize someone with a better car than I have.You know what would have really happened if a meltdown had occurred?A bunch of rich people would have been ruined. The value of their holdings severely diminished. And those of us who were a little more careful about husbanding our resources would have stepped in and gladly paid .01 cents on the dollar.None of the factories would have spontaneously combusted. None of the tangible assets would have disappeared into chasms that opened up in the ground. The jobs lost? They’ve already been lost.

 

Mr. Buffett is a shrewd capital allocator. Hence, we think he is simply doing his job for his shareholders with all legal means possible. Great job Mr. Buffett!

 

Great article and informative. I forwarded this to many friends — all of whom were Buffett fanatics.

Posted by John | Report as abusive
 

You are still naïve Rolfe. You are holding Warren Buffett to standards that would befit a saint, and then see betrayal! He never was a saint. He is a straight-shooting, darn honest, cold-blooded capitalist, always looking to make a buck the legal way. The avuncular garb and PG-13 sexual-innuendo laced humor in his words make him seem more benign than he actually is. Dishonest he is not.Few, if at all, knew how wide and far reaching the fall out of the collapse would be. Buffett did not directly nor indirectly cause this collapse. He readily admits that in spite of his cautions, he never expected the magnitude and rapidity with which it ensued. In managing an investment size as large as his, he is bound to have large exposure to the financial institutions that were part of the entities that contributed to the collapse. His investment holding entities weren’t prime culprits but average players.Buffet rarely directly interferes with the management of the companies he has holdings with. He invests after checking out their balance sheet and evaluating the character of their management. Neither indicates the likelihood of their taking on risk that was dangerous, in an environment where peer pressure melded with system complexity had muddled the operations of even the highly conservative. The bailout was the only way to stave off complete financial collapse that would have threatened the fabric of the nation much more than we have ever seen. It is natural that Buffett ekes disproportional benefits compared to the average Joe – because he has disproportional, widespread assets in the first place.In the Salomon Brothers mess, when Buffett took over, he emotionally proclaimed to Salomon employees: “Lose money for the company, I will be understanding. Lose a shred of reputation, I will be ruthless”. He should now amend that to: ” Lose a shred of reputation, I will be ruthless unless you are a bit player in taking the entire financial system down!”

Posted by Uday | Report as abusive
 

It’s hard to find any significant businessman with interests in banking who hasn’t been affected by the Government’s programs. There are many reasons to criticize Buffett — this isn’t one of mine.Far better to criticize the government, who got scared into a big giveaway to the financial sector. If the government sets bad rules, and offers out money with few strings attached — who is to blame, the one taking the money or the government?Personally, I think more firms would have survived the crisis than many suppose if the government had done nothing, including Goldman Sachs. Instead, they get cheap financing, paying nominal sums to be able to borrow at preferential rates.The government is the problem, not Goldman Sachs or Buffett.

 

This is the guy who is for people paying more taxes. I suppose if I was a billionaire, that position would be easy to take. For one who touts “accounting as the language of investing,” he did nothing to prevent the disaster from occurring and now stands by to profit from it. His legacy will be that greed and little else.

Posted by Pablo | Report as abusive
 

Buffett is a lobbyist now? That’s a stretch. The author of this article is ignorant to Buffett’s investing and the way Buffett thinks. To lobby one must register as such person. Are you saying that Buffett is registered lobbyist? Now Buffett is influential and he used to comment on what he thought would be “right thing” after the collapse of 2008.Author makes us feel that Buffett was invested in all these companies before the collpase undermining his skill. The huge bets he placed in Goldman Sachs and GE where in concert with the bailout, becasue buffet knew these companies would survive. So he did right by shareholders which is ultimately the people he works for. He got a great deal on these investments I might add. If you read the letters to the shareholders you would know that Buffett is not a big fan of banks as business models in general, because they require so much leverage. Couple of missteps and your equity is wiped out.Author of this article is naive to think that all that banks need is to have enough capital. That is a smaller problem in comparison to dumb bets that all the banks made.My friend sent me this article. And I apreciate the disconfirming evidence. But his is just bad quality.People who criticeze Buffett for derivatives, just have no clue what it means in terms of cost of capital.Let me remind you that many where laughing at Buffett when he avoided the whole internet bubble. Guess who was laughing in 2001 and all years after that.

Posted by sergej popov | Report as abusive
 

A couple of things…First of all, Buffett lives off his meager 100K per year salary and has already committed to donating his entire estate to the Gates foundation upon his death. So personal greed is his motive? I think not.Second, Buffett has a fiduciary responsibility to his shareholders to pursue investment and management decisions that most benefit shareholders short and long term interests. As the head of a publicly traded company, he would be open to serious litigation from shareholders if he did anything other than try to protect their interests. BRK is nothing more than a collection of private investors (pension funds, municipal funds, private citizens) whose money Buffett has a duty to protect and to grow.Third, who didn’t benefit from the TARP et al bailouts? Everyone from Buffett all the way down to the guy that cleans the floors in Buffett’s office benefited by stabilizing the finincial system. Yes, Buffett is the largest shareholder of BRK stock, but he is by no means alone in those that benefited.I’m not claiming Buffett is above reproach, but to ascribe motives to him that are clearly false when looked at logically is foolish.

Posted by Matt | Report as abusive
 

GREAT ARTICLE. I APPLAUD YOUR COURAGE IN FINDING FAULT WITH THE GREAT ORACLE OF OMAHA. ALAS, BUFFET IS NEITHER GREAT NOR AN ORACLE, BUT A DOUBLE-SPEAKING OLD WEASEL, WHO PROFITS BY USING HIS NAME AND POSITION AND BY PLAYING UNFAIRLY.

 

GREAT ARTICLE. I APPLAUD YOUR COURAGE IN FINDING FAULT WITH THE GREAT ORACLE OF OMAHA. ALAS, BUFFET IS NEITHER GREAT NOR AN ORACLE, BUT A DOUBLE-SPEAKING WEASEL, WHO PROFITS BY USING HIS NAME AND POSITION AND BY PLAYING UNFAIRLY.

 

Mr. Winkler,You, and all those who play ‘pile on’, have exhibited shameful behavior in your attack of Warren Buffett (Buffett’s Betrayal:Rolfe Winkler). Your examples are sketchy and are of partial truth at best. But what is most shameful is the way you go to motive and the way you attack the character of Warren Buffett. True students of Mr. Buffett have great confidence in his character, and have seen a lifetime of his not being motivated by personal gain. His richness is a product of his principles, his personal integrity, and the culture he has built at BRK. Making money for his own personal gain, fame, or enhanced life-style has never been his game plan.While you have gone straight to motive in your personal attack of Warren Buffett, I shall not do the same to you. I can only guess about what motivates you, but I do not guess about the foolishness of attacking the character of a man who has done more to set honorable examples than then next ten men or woman in line.

 

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