Fast forward 28 years and the Oracle dispatched lieutenants to Washington to fight sensible derivatives reforms that would have made it more expensive to maintain his $63 billion portfolio of them. Luckily the White House beat back the “Berkshire provision.”
In the 1982 letter obtained by Forbes, Buffett waxed philosophic on the dangers of derivatives. His analysis was remarkably prescient. The kind of wisdom one might expect from him today. But as has been clearly demonstrated over the past two years, Buffett is less concerned with sound public policy than with protecting his own interests.
His investment in Goldman was an effort to profit from TARP; he benefited more than anyone from FDIC’s explicit guarantee of bank debt while arguing that such guarantees are unfair; he mocked Treasury’s stress test, which forced banks to raise much needed capital; he opposed Obama’s sensible bank tax, which would charge TBTF banks for the implicit government guarantee they receive; and he was first to propose a public-private partnership to leverage public money to overpay for banks’ toxic assets.
The bottom line is that Buffett is more hard-nosed capitalist than financial straight-shooter. His advocacy of higher taxes for the rich tends to fool media hagiographers into believing he’s willing to sacrifice his interests or those of his investors for the public good. But he’s simply not the unbiased arbiter of sound financial policy that many still believe him to be…
(ht Scott Frew)