Obama is Bush part 3

Buffett's Big Bet: The Real Value of the Berkshire Investment in Goldman Sachs

Taxpayers SHOULD buy what Buffett is buying, instead of what he is telling us to buy.

He says the taxpayer overpaying for crappy mortgages is a great idea for all us little people -- but not good enough for him. He gets a much better deal for himself.

Buffett Enters the Fray

Buffet is a hypocrite.

Its fine for the taxpayer to buy $700 billion of crap mortgage securities -- but its not OK for Berkshire Hathaway to buy even $5 billion. BRK instead bought $5 billion of cumulative convertible preferred shares from Goldman Sachs... you know the sort of preferred shares that Henry Paulson adamantly rejects having the taxpayer buy.

This may be a cruel statement, but its 100% true. Given his age, Buffett will be dead long before the debt for this bailout comes due.

BRK will collect 10% dividend yield from Goldman, even if the mortgage securities continue to decline. The only risk is if Goldman itself fails, which now that it is a Fed protected bank is a very small risk.

If Buffet really believed the mortgage securities were such a great deal, he should have bought them directly. Given his (prior) reputation, such a vote of confidence would likely have brought in lots of other players and eliminated the need for a taxpayer bailout.

Buffett bought cumulative convertible preferred shares for himself while recommending the taxpayer buy all the crap.

Buffet: "Do what I say, not what I do"

The Credit Bubble: Deregulation Gone Wild

Deregulation is the big lie here. Government is MUCH bigger now than when Reagan took office. The Fed knew perfectly well what was happening, and on several occasions issued warnings. They had, and still have, the authority to regulate lending practices at the money center banks (and the little banks tend to follow). The other lending is done by FNMA and FHLMC, which are completely government controlled.

Before you start expanding regulatory power, you need to ask why the regulators made almost no use of their existing powers. You need to establish that existing powers are insufficient -- as opposed to just unused.

Even if you make the Fed into an absolute dictator, what good would it do if they don't use their powers (for good)?

The problem isn't deregulation (which never happened except on paper). The problem is the regulations we already have were not enforced.

The government had to choose between collecting higher taxes on bubble homes, or enforcing the existing rules. The government repeatedly chose higher taxes by turning a blind eye to a problem they knew about all to well.