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.
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I disagree with the points in the article:
Aug 6 11:10 AM
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All Comments by seasaw »Buffett's Betrayal [View 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.