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

after all propping up the economy may work in a short run ,but in long run complete reboot will get red of the ill areas that will only be a burden for taxpayers anyway,Buffet’s dirty goal may not be money but influence and power,without a powerfull army of influenced people a hole fortune will be gone in no time.

Posted by Obi | Report as abusive
 

I am a capitalist, but not a crony. As such, it’s sad to see the vast middle of the sheeple, even the fairly well-educated middle bought the self-interested argument from the finance oligarchy that we just had to bail out “the system” — i.e. the dumb mega-banks, the leveraged financiers, the enormous pile of bad debts, those who co-created and feed at the trough of the enormous debt-production system than the US economy has essentially morphed into over the last 30 years. People don’t seem to realize that we don’t need Wells Fargo or American Express or Goldman Sachs in particular to exist, we simply need a banking and capital markets system, which is a completely different matter from saving dumb firms which got themselves into trouble. Even a total collapse of the existing players would have sent hundreds of smarter, more nimble, wiser capital allocators into in the breach. Alas, they didn’t have the political pull.Mr Barea has it right when he says: “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.”It’s one thing for WB to invest how he chooses. It’s another for Warren to use the considerable moral financial capital he has built up over the decades to advocate for very, very self-interested policy that one can show will be borne on the backs of the taxpayers. WB is a brilliant capital allocator to be sure, but he ain’t no capitalist. He’s a statist-corporatist.A former BRK.B holder.

Posted by Jeff | Report as abusive
 

Very good article. Glad to see my same feelings put to print.

Posted by Rich | Report as abusive
 

I thought it was so sad and pathetic when Buffet was pressuring/extorting money from the gov’t. Does everyone remember his editorial trying to convince everyone to buy into the stock market in November? I suppose that’s how he justified his rampant theft of taxpayer’s money; he tried to give us a piece….of our own money. What a nice guy!Are you ready? A New Era Begins…..http://www.youtube.com/watch?v= VRhyWZnGjyc

 

So sell your BRK stock and shut up. I’m keeping mine.

Posted by billsharkey | Report as abusive
 

buying into this love affair of business and government elites who have twisted and turned monetary policy towards their own benefit..aka greed…serves the average American little except higher prices and taxes..it is sad to think that the generation before never suffered this appallingtreatment, but now the baby boomers and all generations to come after, will…who will believe in the American dream then?

Posted by edna thackeray | Report as abusive
 

Most of the investing was done when the perception (GE, Goldman, Wells Fargo) were at low prices. One can say that WB may take advantage of government largesse, but even if that were true, and I suspect that it is not, Graham would have been impressed. Why? Because the stock prices were low and the book and intrinsic values (relatively) high. The fact that the government, which, after all, gets paid back, provided funding is practically irrelevant to the stock purchases. As to American Express, it’s been in the portfolio for many years; again, the fact of government intervention has nothing to do with the logic of the investment. Again, when blood was running in the streets, WB did the one thing most of us are frightened of doing, he bought stock and warrants.

 

Rolfe,I often find it intriguing why people spend so much time critiquing great individuals instead of study them. Your case is especially intriguing.I applaud you for getting into investing and discovering Warren Buffett at such a young age. I only wish I discovered him as early as you did. However, it saddens me to see you write such an article.First, to say a good chunk of his fortune is dependent on taxpayer largess is simply false. He invested cash into the companies you mention so had he not invested in those companies, he would still have his “fortune”. The results of his investments are uncertain as he has not exited from them and do not plan to exit from them so I’m guessing you’re simply stating your belief that the investments he made amidst the financial fallout were very wise ones that will generate enough profits for him in the future to become a large part of his already staggering fortune.Second, please be clear that he invested in these companies before TARP. He simply made a bet that these companies will be profitable in the future and will pay him his 10% dividends. If the government had not bailed these large institutions out, you would probably be out of a job. And keep in mind that the shareholders did get wiped out in a majority of the cases. Therefore, it is only fair to say that he made a bet and it paid off. (I figure his thinking was the government will do something and thus his move will be a profitable catalyst to instilling confidence. And if the government does nothing, then there will be much bigger things to worry about).Third, I wonder if you are also the type of person to complain about the government’s misspending of our tax dollars. If you are, and you also seem very righteous in promoting what’s good for society and humanity, then I don’t see what your complaint is because Buffett is donating most of his wealth to society so be patient, the money that he’s making from these “detestable” institutions will come back to causes you perhaps would champion. Heck, wouldn’t you rather he get paid and donate the proceeds to charity than goldman having $1B more each year to dole out to the people you so dispise. Also, consider that he states repeatedly that the Fed, through massive money-printing, is taking the necessary actions but will have consequences in the future. What the Fed is doing is basically a huge ponzi scheme. We are the shareholders of America so if you want to talk about share dilution, the fed is the main diluter. Warren Buffett is the largest private shareholder in America so he would get hurt the most on an absolute scale but he still proposes the necessary actions. I’ve yet to hear of him lobbying for the gold-standard to avoid his share-dilution.Lastly, derivatives aren’t all bad. He and Munger condemn derivatives because of their potentially crippling effects due to the leverage and counterparty risks often involved. In Buffett’s case, there is no counterparty risk and there is no leverage. There is only a chance for him to use the float to earn a return or for all four indices to plunge to in 15 years and Buffett paying the money.As an investor, I am proud that the business world still has people like Warren Buffett and Charlie Munger. They will do more good to society than any businessman or saint has ever done. Therefore, I can only say take my tax dollars Mr. Buffett and makes lots of money with it and donate it in a way that the government, the banks, and the saints can’t.p.s. I don’t see how Buffett has betrayed anyone and certainly how he has betrayed you. He has never promised any of us anything but that he will grade himself with his internal scorecard. If you ask him whether you, and fellow 14-year-olds should look up to him as the moral guidance, he would perhaps humbly respond that you’d be better off looking in a monastery. And if it is the annual meeting he invited you to when you were 14 that you took as his loyalty to you, then I’m sure he will still be happy to have you. perhaps the title should be “Rolfe’s betrayal”.

Posted by Peter Shi | Report as abusive
 

Good article.You write: “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?”The banks were investing with a “margin of safety”: They (at least the big ones) knew that the government or the Fed would be there to bail them out. In effect, the Fed is their source of virtually unlimited backup capital reserves.This is what the Fed was (unofficially) set up to do: Bail out the big banks that form its core “Class A” shareholder base, and the firms that are associated with them. With this assurance against paying for their losing speculations, these special firms, always deemed “too big to fail”, can and have made those otherwise risky bets with impunity.We are now seeing this bailout function in action, to the tune of trillions of dollars. The Fed is performing is prime function perfectly: protecting its own.This is all explained in the book “The Creature from Jekyll Island”, specifically in Chapter 2, titled “The Name of the Game is Bailout”.

Posted by MarkV100 | Report as abusive
 

Rolfe,It’s a pity you, like so many of your readers, stopped learning about Finance at the age of 14. What makes Buffett so special is his ability to see things in simple terms, things which the rest of us in the industry spend days on–drawing conclusions from complex mathematical models. I’m comfortable with my models, but then again, nobody knows me from the next schmuck. And that anonymity has meant that most of us don’t care about what happens outside of the 1′s and 0′s on the computer screens or in our bank balances. Think what you like, but let me say this: without getting into specifics, trust me when I tell you that Buffett is one of the few guys in this industry who actually cares about this country, for what he’s done over the last 7-8 months, he might be the only true patriot left.

Posted by Aaron K | Report as abusive
 

I bought goldman sachs at 54.13 . Sold them for154.78 . I made over thrity thosand dollars profit.My big buy tip on gs was a news article stating thatbuffet bought five billion worth. thanks warren

Posted by JIm Boyd | Report as abusive
 

The way in which the article is written implies that Buffett was the single and most influential factor in the government’s decision to bailout the banks. Albeit, that he may have had some influence, but by that time I believe the Feds, whether they made it public or not, had decided a bailout was neccessary. Even if the Feds haven’t made the decision yet, others would have lobbied the government for a bailout. Thus, whether or not Buffett voiced his opinion he would have been bailed out.Furthermore, the statistics used in the article are misleading. The focus should be on the investments that Buffett made around the time that the financial crisis unfolded (i.e. focus on GS and GE) which make up less than half of his bank holdings. And even then, he invested in preferred shares (albeit there are warrants to purchase common shares attached).

Posted by sam | Report as abusive
 

This artile is misleading in two major ways. First off, $50 billion (over half) of the TARP money he mentions went to 2 firms where Berkshire holds about $100m total in equity, vastly skewing the results (just look at the chart). Second, his investment in Goldman Sachs (the largest one listed) only came about after the crisis and was part of the solution in conjunction with the government bailout, so his $$ here was never in real jeopardy even absent the bailout. He just saw an opportunity where a solid company was being overly penalized by the market due to a run on the sector and made a smart investment. Goldman, incedentally, has already repaid the TARP money with interest.

Posted by Donald | Report as abusive
 

I don’t think Buffet was the only one promoting bank bailouts.Many people saw a collapsing financial market in 2007 and I personally sent an email to the Federal Reserve while I was attending a California University, requesting them to generate funds for the banks liquidity.The government has done everything correctly, except it should have restored liquidity earlier to prevent such a financial collapse. Apparently it takes a financial collapse to get an act of congress.Our debt loving country is to blame for the collapse and Warren Buffett is a hero for lobbying the correct policies for an economic recovery.Anyone complaining most likely didn’t buy financial stocks in March and was probably following the Nationalization retards.

Posted by William | Report as abusive
 

To comment on the general premise of the article:Firstly, all Buffet is doing is being an activist investor. His investment thesis could have been fully aware of the potential worst case scenario for the companies he was invested in as well as he could have speculated that in a time of crisis and with lobying from the right people there would be a bailout. Managing money is like golf, there’s no room on the scorecard for pictures.A hole in one is still marked down a one even if it hits off a tree…Additionally, in my opinion you cannot talk about the hypothetical of banks going insolvent when evaluating a manager because without the bailouts we could be in a very different world period. If the banking system would have collapsed the majority of holding companies / funds would have gone down simply with their clearing firms. Without the bailouts Buffet would have gotten hurt really badly sure but the only way he could have avoided losses had the bailout not occured would have been to sell everything before the break… That would simply not be possible for the largest line in the world BRK.A bigger chirp to Buffet is that he is underperforming the S&P. Anyways, good talk.

Posted by S W O | Report as abusive
 

Can’t believe that someone thinks Buffet lives off a $100K salary. Yea, right and all his travel, medical expenses, taxes, etc. come from that 100K salary . He’s got you fooled.As for his Gates donation, he is donating his entire estate upon death – what’s keeping him from helping make a better life for the millions of starving people in Africa, India, Mexico, etc. Oh, I forgot he is too busy investing and trying to make more money.

Posted by Pablo | Report as abusive
 

What you completely ignore is that because of the size of his portfolio, it’s much harder to Mr. Buffett to make the same return on his investment these days. He could beat anyone in the game at investor smaller sums in smaller companies, where growth in the company and thus the stock price is much easier to realize. For him to keep up the same growth levels, he has to invest much larger sums of money, and usually in much more establish companies.You’re entire argument is based on the fact that he’s invested a lot in companies that received bailout money? Well, put it into proportion. There are tens of thousands of investors out there who own an equal proporation of these stocks compared to their asset base, it’s just that because Buffett is bigger, he becomes a target.It’s a lot easier to be a critic.

Posted by EJ | Report as abusive
 

And Buffett betrayed who exactly?Do you think the US taxpayer would have been better off if there were no bailouts and all the banks collapsed 1929 style?

Posted by Tim 333 | Report as abusive
 

Buffett has had a positive influence on my investment process, and I can’t blame him for trying to protect his capital. In serving his own interests, Buffett served the interests of all of us. If these companies, which Buffett happens to own, were to fail, the entire financial system would have failed. This is a well written article that highlights Buffett’s self interests, but Buffett did not pursue his self interests at the expense of the American taxpayer. We all would be much worse off if these companies were not bailed out.

Posted by Tony | Report as abusive
 

re Darwin,I find it curious that you label people who question (or are outraged by) the bailouts as “left-wing anti capitalists”… I’ve always been under the impression that true capitalism regards beurocracy/taxes/handouts/regulation as asphyxiating… i guess, that is, until something is needed from the government it/they bemoan?I’m poorly learned when it comes to the nuances of finance and am confident the economy would have been far worse off without the bailouts (at least in the short term)… but it seems ironic that someone named Darwin is concerned that the damn lefties want the weak to look after themselves.

Posted by BlueAss | Report as abusive
 

Here is my view of St. Warren…http://www.financialsense.com/edi torials/collum/2009/0129.html

Posted by David B. Collum | Report as abusive
 

Good article. I’ve got nothing against Warren Buffet, and I do admire the man for his successes. He does, however, have enough money and doesn’t need help paying a mortgage, getting enough food to eat, paying for medical problems. So I do wonder why we are shielding him from taking the hit that the market would inflict on him and his businesses. Those resources spent keeping him whole could be put to much better use.

Posted by Weevie | Report as abusive
 

This old bastard crook has been manipulating the congress for bailout. This SOB is one of the biggest crooks and uses every opportunity to get publicity.

Posted by Buffethater | Report as abusive
 

Remember Buffett opposing elimination of the Death Tax (inheritance tax)? His LIFE INSURANCE companies LOVE the Death Tax because it forces family businesses to spend lots of money on LIFE INSURANCE, to keep the company in family hands. Meanwhile the superrich like Buffett avoid the Death Tax by setting up giant foundations and putting their relatives on its payroll. Does anyone think the Rockefellers or Buffett or Bill Gates pay ONE CENT in Death Taxes?

Posted by Mike Hardiman | Report as abusive
 

This wonderful human being is being vilified just like Jimmy Carter was,who also was one of the most honest, decent and truly one of the most benevolent human beings on earth. What’s wrong with Mr. Buffet trying to protect my investment in Berkshire (almost 1 share of class B)!!!Mr. Buffet is a supreme capitalist —- not a priest!

 

According to my quick calculations: Berkshire Hathaway’s market cap today is @ 170 Billion and the 7 billion in equity that Warren stood to lose if all his financial company stock holdings went to zero amounts to @ 4% of Berksire’s market cap.Something inclines me to believe that if Goldman, American Express, General Electric, US Bankcorp, Wells Fargo, Bank of American and Sun Trust Bank (among many others) were simply allowed to fail (moral hazard aside) it is very likely that ever poster here and virtually everyone else in this country stood to lose a great deal more than Warren.As for Moody’s it was a great ride while it lasted, however, with the perverse incentives in the bond-rating set-up it was inevitable that chickens would come home to roost one day.IMHO

Posted by NLC | Report as abusive
 

Wow, I never realized how many people work for Berkshire Hathaway until I read this. I thought you were being too generous to Buffett. He is a colossal hypocrite who has always made his money through corrupt government programs. You forgot to mention his large investment in Fannie Mae over the years.Behind every great fortune is a great crime.

Posted by morgan | Report as abusive
 

Berkshire Hathaway investment strategy vs. The Taxpayer’s/government’s investment strategyTaxpayer’s GS return vs. Mr. Buffett’s GS return on the date of the transactionBerkshire HathawayBuffett’s investment in Goldman was $5 billion worth of perpetual preferred stock @ a 10% dividendHe has 5 years to exercise his warrants on $5 billion of common stock @ a strike price of 115 a share.43.5 million warrants valued by Black-Scholes @ $3.6 billion or $82.18 eachTaxpayers investment in Goldman was $10 billion TARP and $12.9 billion from AIG12.2 million warrants worth $882 million or $72.33 each.This my friends is why he has one of the best investment records and reputations in the investment industry.BottomlineWarren Buffett’s investment in Goldman will net Berkshire Hathaway billionsThe taxpayer’s investment in Goldman which IS FOUR TIMES as much will not even break even.Warren Buffett was Goldman’s Saint while the Taxpayer bailout was Goldman Sach’s Messiah

Posted by alberta911 | Report as abusive
 

What was the point of this piece? That Buffett betrayed… the taxpayers? Did I just wake up in a world where Warren Buffett is now a politician?He is not a saint. He is a capitalist–one of the best. His day job and duty is to his shareholders, and on that measure he is doing just fine, thank you. This shareholder does not feel betrayed. And to say Buffett exploited the taxpayers is laughable. That’s like saying you exploit child labor because you wear Nikes.The facts in this piece are fine. The way they are spun to generate sensationalism is positively Murdoch-ian. I expect better from Reuters.

 

When push comes to shove its not how where the money comes from its do you have it or not. When my enemy points a gun at me I do not start waxing all moral/ethical on him. Is Warren working to make money? If so he is great at it. If he is trying out to become a saint he has a little polishing to do. Like most I have opinions on how the govt spends my tax dollars. On the other hand I would love govt contracts to come my way and if I was given money by the govt for work or perceived work would I argue? Fred

Posted by fred | Report as abusive
 

If smarmy windbags talking out of both sides of their necks when it comes to bailouts in untold amounts with no strings attached to mismanaged banks and desolate ruins of once-proud arbitraged-to-death corporations, nothing in return for the working stiffs who fund them, no punishment for those who misappropriate them, and above all, no sign of humility or even gratitude on the part of those receiving them… if this is what bothers a 14-year-old, then there are a lot of 14-year-old Children of the Corn out there. And they’re coming to town.No amount of happy-face greenwashing a la Gates Foundation is going to save the guilty parties. Warren and all, they’re doomed, period.

Posted by The Bell | Report as abusive
 

Wow! I must say you must have balls of steel to question the man’s integrity.But you do present a compelling argument there.Well done! Balls of Steel Man! :)

Posted by balls | Report as abusive
 

This is nuts. Buffet made his fortune on Gilette and Coke and all sorts of investments long before the current crisis arose. When it did arise, was he really obliged to let Berkshire fold “on principle”? He legally protected the interests of his shareholders, the people whose money he manages. So whom has he betrayed? You? What does he owe you? Yikes.

Posted by Lawrence Kramer | Report as abusive
 

I disagree with the points in the article:1. Buffett’s fortune is definitely not dependent on taxpayer largess, in fact, Berkshire Hathaway is a large taxpayer itself, paying paying an average of 4 1/2 billion dollars in taxes a year from 2005 to 2008. The investment in these institutions is a small fraction of his net worth (maybe 10% to 15% – much less if you only count those investments prior to the calamity). In my analysis at the time, I concluded that none of these institutions would have failed even without any government assistance. (There are many companies that would not have failed even if the government had not provided financial assistance.2. The bailout is somewhat of a misnomer. The Government is and will make a profit on this money and the Government required some of the institutions to take the money. For example, the Tarp money is not free money but was given in return for convertible preferred shares that paid 5% (10% after 5 years) and are convertible into common stock at various prices. The Tarp also came with numerous restrictions, such that some many of the institutions wish they hadn’t taken it.3. Goldman and GE wanted to capital and Buffett agreed to provide it, in return for convertible preferred paying 10% and convertible to common stock at a particular price. There is nothing wrong with this. There were others with money that Goldman and GE could have struck a deal with.4. Buffett tends to avoid attacking specific companies or people, although he does on occassion. To the extent Buffett criticized the financial industry and it applied to Well’s Fargo, American Express, etc., I saw nothing indicated that Buffett excluded them. In fact, I took some of the criticism to be referring to some of them. He is only a shareholder, he does not own a majority stake in or run any of the financial companies mentioned.5. Buffett has spoken publicly of Moody’s and indicated that they made mistakes in their ratings and Munger, his partners, has also publicly so indicated. I can find and provide the cites if you need them, but with the internet, I am sure you can find them as well.6. buffett did not mock the stress tests. His point, with which the government and perhaps you disagree, is that Well’s Fargo was adequately capitalized and not in danger of failure, particularly in light of their large earnings power. I happen to agree with this analysis. Wells Fargo would not have gone under, in my opinion and in Buffett’s I believe, even without government intervention. You may disagree.7. I also agree with Bernanke’s action in quickly provided substantial liquidity to a variety of markets during the financial crisis and I agree with Buffett’s voval support of this course of action. Without such help, thousands of banks and thousands of companies would have gone bankrupt, causing a spiraling downward that would have had disastrous consequences far worse than what we have seen. At least this is my opinion and I believe it is Buffett’s opinion.8. buffett did not get a bailout and did not exploit the taxpaying public, of which he is one of hte largest ones, for his own gain.There is no doubt that Buffett, like all of us, has his flaws. I don’t think he, or anyone else, would dispute that. HOwever, as you can see, I disagree with virtually every point made in this article. Furthermore, while Buffett is wealthy, he has managed to be relatively modest in his spendings (althoug, let’s face it, he still spends substantially more than most of us even if he is thrifty) on himself and most of his money will go to charity.

Posted by Seasaw | Report as abusive
 

YAAAAAWN! What’s your point? That the US would be better off if those institutions hadn’t received government help? No, we’d be heading toward a repeat of the Great Depression. Guaranteed.

Posted by James Ludemann | Report as abusive
 

if all the company in your chart collapsed do you know how big a disaster that would be? not just buffett will lose, everyone will. buffett is good in the sense that he knows they are not gonna fail (thanks to federal aid). if you had known they won’t fail would you buy the stocks since the prices has gone so low?

Posted by adsf | Report as abusive
 

I am glad that my initial sentiments and reactions toward Mr Buffets actions last year are finally being discoursed by others. To be fair, we do not know exactly when Berkshire took stock positions in these other banks. When the Goldman warrants deal was announced, my initial reaction was that of a smart deal for Buffet. But, when he publicly began supporting the government bailouts of these various firms, at terms that were far less favorable to the taxpayers than those he negotiated for his own company I lost any and all respect for a man I always admired.

Posted by mspen | Report as abusive
 

Great Article, takes guts to trow one at the incumbent investment genius, my hats off, and may you please continue opening our eyes.

Posted by Carlos | Report as abusive
 

This is the very best piece on Buffett I have ever read. What is going on does not surprise me at all, excellent work.

Posted by Thom | Report as abusive
 

Good article. I divested myself of BRK after Buffet stated that the bailout and stimulus was “the right thing to do”. With BRK being so loaded in financials it was obvious what he meant.

Posted by GTWRECK | Report as abusive
 

I wish the US taxpayer would stop complaining. Any time they want to compete in the real world without all there subsidies and barriers, good luck. Just think about it, how does anyone working in the US car industry think they compete with any asia carmaker. They don’t they are being supported just like Mr Buffet. So just be quite and thank your government for printing phoney money so you can continue to believe the US are the masters of the universe.

Posted by gd | Report as abusive
 

Just another example of Buffett’s hypocrisy (he advocates that companies pay dividends–but his own doesn’t. He rails against insider Boards, but look at his own packed with kids and cronies. He advocates corporate disclosure, but his own reporting is of the “trust me” variety.) Maybe at one time this guy could invest under the radar and buy undervalued companies and be a portfolio genius, but now he simply has too much money to make it worth his while to make money off doing good deals with private owners–the only entity left is the biggest sucker of them all–Uncle Sam, courtesy of Professor Ben and Easy Al.As to the people who suggest that his only duty is to his shareholders–if it is, then he should stick to that and not give advice to the rest of us. Perhaps he could preface his well-publicized remarks that he is solely motivated by doing what is best for Berkshire Hathaway–somehow I doubt he would want that. But you can’t have it both ways.

Posted by But What do I Know? | Report as abusive
 

Say it aint so Warren. Thx for the news. Not something I read in the Times. Is this info widely known?

Posted by Ben Mahler | Report as abusive
 

Your comments about Buffett stand up just fine but you miss the long term point. Using a Property and Casualty company as an investment compamy all these years have given him significant tax advantages. All I would say is follow the reserving if you want to see his wealth accumulate. I am envious of him for this. But then his very early partnerships, US Air and Salomon brothers are never mentioned. He also did the best job ever of hiding an eary G-4 and mistress. God bless him, Regards, Walt Kirkbride

Posted by W. Kirkbride | Report as abusive
 

I don’t think your arguments hold much merit, sounds like sour grapes to me. I don’t see he defrauded taxpayers. You seem to forget that anyone in the world had the opportunity to make essentially the same investments as Buffett, but at less than half his basis. (True that he has preferred, with dividends and some extra warrants) but he purchased GS when it was around $125 with warrants at $115 back in September. Since then, anyone with a brokerage account could have purchased GS for as low as $60 and at many, many times less than $80. The opportunity to purchase around $60 was also available after TARP. Buffett invested before TARP, it was possible that they would not have been bailed out, hence he might have had a large loss. I suspect there are quite a few people who did jump in and buy GS at $60 and they are quite happy now, and very glad to have Buffett advocating for their stock. A similar case can be made for GE, but only the public had the opportunity to buy in even lower.

Posted by Jim | Report as abusive
 

I have also been a Warren Buffet fan for years, and have not agreed with his rejection of investing in technology “because he doesn’t understand it”, but the author is not being fair. Buffet believes in buying and holding without taking an active management role. He bought most of those financial stocks years and years ago when they were great “buys”. Yes, their managements screwed up and needed bailouts, but so did every other financial congomerate in the world. Was the author suggesting he should have come out against bailouts rather than supporting them. Get real!

Posted by Ron Wright | Report as abusive
 

wow, great article and great response to howard comment. I feel duped, Buffet is sort of a hero to me, someone from near the ground up make it to the top purely on investing. this hurts but better to find out the truth. I wish more of this exposure was public knowledge. Not just about Buffett, but about all, including congressmen and their investments.

Posted by Adam | Report as abusive
 

Now we know why Buffet backed Obama, don’t we?

Posted by AGB | Report as abusive
 

It is easier for a camel to pass through the eye of a needle than a rich man to enter the kingdom of Heaven.

Posted by Lilliana Ross | Report as abusive
 

The notion that Buffet backed Obama for a bailout is the usual right wing paranoid blather. I know the guy who posted that so I’m not surprised. The TARP bail outs began under Bush, remember? And had McCain and dingbat been elected they surely would have continued….so saying that Buffet backed Obama because he was expecting a bailout is ludicrous of course…

 

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