9 ms·

Warren Buffett: Pretty Good for Government Work

111 points by jakarta 16y ago

holdenc 16y ago
Perhaps the government did avert a short-term disaster. But it's unremarkable that they distributed billions to companies who effectively held taxpayers hostage, threatening "if we go down, you go down with us." There was no way to not give out money without incurring intolerable short-term pain. I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies.
- RtodaAV 16y ago
  They should have saved Lehman Brothers.
  - cdavid 16y ago
    Why the downvote ? I believe it is pretty much agreed on that letting lehman brothers fall was a mistake - of course, saying it afterwards is easy.
    - borism 16y ago
      because this is not particularly popular opinion in extremely libertarian tech circles, no matter what people more knowledgeable about those things say.
    - thasmin 16y ago
      Where can I find details about this?
      - cdavid 16y ago
        I read mostly on French ecoblogs, but in English: - http://delong.typepad.com/sdj/2008/09/a-very-large-in.html - http://www.nytimes.com/2009/09/12/business/12nocera.html?_r=1&hp You can find much more if you look a bit. I think outside the libertarian on the fringe, most people agreed the decision was certainly not obvious to make at that time. I am sure it will take time before academics agree (if ever:) )on whether this was a mistake or not.
- pedrocr 16y ago
  > There was no way to not give out money without incurring intolerable short-term pain. Sure there was: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html http://www.nytimes.com/2008/09/23/business/worldbusiness/23k... The Swedes actually solved this by nationalizing all the failing banks, wiping out the equity holders, restructuring and privatizing again. It ended up not costing much. In the US a bunch of bankers got huge bailout funded bonuses and the banks are far from solvent even now.
  - nl 16y ago
    But they had one incredibly useful attribute that the US government didn't have: time. They had time to extracted pounds of flesh from bank shareholders before writing checks, time to design policies to force banks to write down losses and issue warrants to the government 2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months.
    - borism 16y ago
      There were 7 months between Bear Stearns (Feb '08) and Lehman (Sep '08) events, and things started to go downhill long before that - August 2007 in particular was the turning point. Many in the US were simply asleep at the wheel, both in government and private sector.
    - pedrocr 16y ago
      >2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months. Looking this up in Wikipedia it seems the crisis started in early 2007 and Lehman collapsed in September 2008. So there was a year and a half to plan a response. http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financial_market_impacts.2C_2007 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financ...
      - nl 16y ago
        Yes and no. Yes, there were plenty of signs of the sub-prime crisis. However, no one expected it to cause an investment bank like Lehman to collapse. It wasn't until the day of the crash that the people begun to dig into how the mortgages had been repackaged and sold, and it still wasn't widely know how badly the ratings agencies had failed in their analysis of this. (Ok, so it seems likely that Goldman had a fair idea and possibly went short Bear Sterns based on their exposure, but they weren't exactly spreading that information around)
- JesseAldridge 16y ago
  > I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies. http://en.wikipedia.org/wiki/Obama_financial_regulatory_reform_plan_of_2009 http://en.wikipedia.org/wiki/Obama_financial_regulatory_refo...
- marcamillion 16y ago
  That's the vagaries of capitalism. Can't have your cake and eat it. Once you believe in Capitalism, there will always be systemically important companies - whether it is Google, Amazon, etc. or Banks - that should something go wrong with them will require a bailout of some nature.
  - arethuza 16y ago
    I'm all for capitalism, but if there are companies which fall into the "too big to fail" camp I want them split up and/or their management put on special notice that if the companies do fail then the taxpayers will be coming after the assets of the the executives should the company fail. NB I really don't think that applies to Google or Amazon.
    - marcamillion 16y ago
      If Google went down...literally overnight, thousands if not hundreds of thousands of small businesses that rely on AdSense to pay their bills would be in serious hot water. Not to mention those companies that rely on Adwords to drive traffic through their doors (both online and offline). I can almost assure you that the markets would get very jittery and irrationality would likely spread to all sorts of other industries. It is easy to take these things for granted. Amazon is the same. There are thousands of mini-retailers that earn a living on Amazon. Amazon might even be more so - the equivalent of a Walmart going down....but almost worst. At it's extremes, the beauties of capitalism lead to large firms that build ecosystems to entrench their positions - whose failure would be significant and potentially systemically dangerous. It is the nature of capitalism - it actually is very healthy for the system. Over time they eventually fade out and other large companies come and take it's place - e.g. the newspaper industry, telecom, etc. So you can't really escape it.
      - arethuza 16y ago
        No doubt that would be really bad - don't get me wrong - but it's not quite at the scale of what almost happened in 2008.
      - 16y ago
- guelo 16y ago
  Most of the $700 billion TARP money was recovered, the costs are only going to be about $30 billion which is a bargain for what it achieved. http://finance.yahoo.com/banking-budgeting/article/110920/exclusive-treasurys-tarp-aig-bailout-costs-fall-to-30-billion?mod=bb-budgeting&sec=topStories&pos=main&asset=&ccode= http://finance.yahoo.com/banking-budgeting/article/110920/ex...
- deleted 16y ago
  [deleted]
- asmithmd1 16y ago
  What I don't understand is why they didn't break-up any banks that were "too big to fail" into pieces that were small enough to fail. Instead they did the exact opposite, arranging shotgun marriages for failing institutions so they are now part of a bank that is too big to fail. The Justice dept. has very successfully broken apart companies in the past: http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Standard_Oil#Breakup http://en.wikipedia.org/wiki/Standard_Oil#Breakup No government ownership is involved; one day you own 1 share of AT&T and the next day you own 1 share of the new AT&T and 1 share of each of the new baby bells. I would argue the AT&T break-up allowed the first internet boom to happen. Can you imagine how hard it would have been to get a T1 provisioned if there had been no competition AND AT&T was offering a service just like what you were trying to start
  - Benjo 16y ago
    You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks? If you put them all in one place, that bank would fail and still cause the same chain reaction, except the debt would fail entirely on the customers of the bank instead of the bank itself. If you spread out the assets, then you'd just have lots of smaller banks fail instead of the larger bank. I suppose doing this could have spread the failures out over time.
    - asmithmd1 16y ago
      By all means put out the fire by doing what they did in the moment. But then respond not by passing ineffectual legislation that will surely be gamed and circumvented but with stress testing the banks to see which ones are too big too fail and breaking them up until they are small enough to fail. As to who gets the "toxic" assets, who cares? They are all but worthless. Auction them off to whoever will buy them that way we no longer have this fiction that they will ever be worth anything. The US tax payer is now explicitly on the hook for these assets. The sooner we know what they are truly worth the better.
      - 16y ago
watchandwait 16y ago
Warren Buffett's corrupt Moody's credit rating business is at the heart of the financial crisis. Funny he didn't mention that. http://voices.washingtonpost.com/economy-watch/2010/05/credit_rating_agencies_the_rea.html http://voices.washingtonpost.com/economy-watch/2010/05/credi...
- gg25 16y ago
  Nice straw man attack. How does that have anything to do with his argument that Uncle Sam helped calm one of the biggest economic crises in history? Also implying that Moody is corrupt is asinine. Yes, they made mistakes (what credit agency didn't during the housing bubble?), but they didn't break any laws.
  - zoomzoom 16y ago
    Would hardly call it asinine. There is a difference between illegality and corruption, and many would argue that us lawmakers have legalized bribery in the financial sector. You may disagree, but that doesn't make the viewpoint ignorant.
    - pwhelan 16y ago
      The implication, however, is that they were doing something shady that the rest of the credit rating agencies were not -- which is incorrect.
kqr2 16y ago
In the interest of full disclosure, Warren Buffett should have mentioned that he will probably make about $3.5 billion off a $5 billion investment (70% return) in Goldman Sachs. Goldman Sachs in turn received $13 billion via the AIG bailout. http://www.bnet.com/blog/financial-business/how-warren-buffett-8217s-gamble-on-goldman-sachs-paid-off-big/8326 http://www.bnet.com/blog/financial-business/how-warren-buffe... http://articles.latimes.com/2009/mar/21/business/fi-aig-goldman21 http://articles.latimes.com/2009/mar/21/business/fi-aig-gold...
- varjag 16y ago
  The assets of Berkshire Hathaway though are US$ 297.119 billion, per Wikipedia. He certainly has the vested interest in GS revenues, but perhaps not as much as you imply.
  - pierrefar 16y ago
    Are you suggesting $3.5b are not worth mentioning?
    - jcmoney 16y ago
      Sure $3.5b is a lot of money and worth mentioning; but just that alone is somewhat misleading considering it's a very small fraction of Berkshire Hathaway.
    - varjag 16y ago
      No, what I suggested is that Golfman Sachs revenues do not make it or break it for him. The guy is very rich. Thus it is unlikely that mere 3.5 billion would affect his public statements, especially expressed in such an indirect and convoluted way as praising the U.S. government.
- nl 16y ago
  Perhaps he should have disclosed it. But at the same time it's difficult to find any serious investor with a mildly diversified portfolio who didn't benefit from the government intervention (from reduced losses if nothing else) Do you have 401K? I bet that has some money in Berkshire Hathaway and/or Goldman Sachs. Do you need to disclose that?
joelmichael 16y ago
I agree with Warren. The government handled the crisis very well, with the possible exception of allowing Lehman Brothers to fail. It's pretty remarkable, really, and it's unfortunate populist cynicism opposed the saving of the economy.
stretchwithme 16y ago
What is the great disaster that was supposed to have befallen us had Secretary of Treasury Hank Paulson and former CEO of Goldman Sachs not gotten his $700 million slush fund? Certainly many of those placing their bets on the collapse of housing bubble would not have gotten paid by AIG, but how does that cause the rest of the economy to collapse exactly? Yes, your investments would certainly have experienced losses as the companies doing all the stupid things dropped in value once their folly was fully revealed. But isn't dumb behavior and blind faith in casinos supposed to be punished? Instead of that righteous outcome, the costs are no being dumped upon millions who had nothing to do with all of the stupidity. And the reckoning has merely been postponed and perhaps will grow even larger now that they have been encouraged to continue taking foolish risks. Personally, I think Warren Buffett knows better.
- rmah 16y ago
  "What is the great disaster that was supposed to have befallen us..." Simply put, the thesis is that the entire world economy would have collapsed. It would have started with most of the investment banks being unable to do business and shutting their doors. This would have caused a chain reaction other parts of the financial system since the big money-center banks provide much of the overnight lending liquidity for smaller banks (and each other). Banks would start failing at an incredible rate. As the banks started to fail, the equities, bond and commodities markets would have collapsed. All these markets rely on short term lending, not just for leverage, but to underwrite transactions. Even if this were not the case, much trading volume would have dried up. This combined would have led to a crash in those markets. Finally, and most importantly, most businesses rely on lines of credit and other short term debt facilities to finance day to day operations. They use this to smooth out the cash flow when buying raw materials/inventory, purchasing assets and meeting payroll. These would have all been effectively frozen. You would have either seen paychecks becoming worthless or massive layoffs within a few weeks to a few months of the initial bank collapses. By massive, I mean a spike of an additional 10% to 20% unemployment within a few weeks or months. I won't go into the effect all this would have on currencies and international trade. All told, it would probably have plunged the entire world into a depression that would have rivaled or exceeded the Great Depression of the 1930's. It likely would have been worse because of the interconnectedness of the world's financial and commercial systems today.
Towle_ 16y ago
Long live the Austrian School. Nothing else makes sense.
- borism 16y ago
  Right! Everything else uses math, and math is HARD! http://en.wikipedia.org/wiki/Austrian_School#Criticism_of_the_Austrian_School http://en.wikipedia.org/wiki/Austrian_School#Criticism_of_th... Critics have concluded that modern Austrian economics generally lacks scientific rigor,[10][12] which forms the basis of the most prominent criticism of the school. Austrian theories are not formulated in formal mathematical form,[108] but by using mainly verbal logic and what proponents claim are self-evident axioms. [10] Caplan, Bryan. "Why I Am Not an Austrian Economist". George Mason University. Retrieved 2008-07-04. "More than anything else, what prevents Austrian economists from getting more publications in mainstream journals is that their papers rarely use mathematics or econometrics, research tools that Austrians reject on principle...Mises and Rothbard however err when they say that economic history can only illustrate economic theory. In particular, empirical evidence is often necessary to determine whether a theoretical factor is quantitatively significant...Austrians reject econometrics on principle because economic theory is true a priori, so statistics or historical study cannot "test" theory." [12] White, Lawrence H. (2008). "The research program of Austrian economics". Advances in Austrian Economics (Emerald Group Publishing Limited): 20 [108] Walker, Deborah L.. "Austrian Economics". Library of Economics and Liberty. Retrieved 2010-01-23.
  - CamperBob 16y ago
    Well, there's some low-hanging fruit in that article. What branches of economics do rest on scientific rigor?
    - borism 16y ago
      true, there are a lot of axioms in many branches of economics that noone is allowed to touch, some have more, some have less. But AFAIK nowhere as much as in Austrian School today.
    - 16y ago
jswinghammer 16y ago
When the next round of problems start up this is going to look pretty funny. There is another wave of credit problems coming and the banks are vulnerable to all of the same downside risk they were before all this started. In 1931 the establishment thought they solved the problem and that things would get better soon. The collapse of the Austrian bank Creditanstalt proved them wrong and started a new series of problems.
ungerik 16y ago
I think you can't expect unbiased information regarding to money from one of the 3 richest men in world.
- Travis 16y ago
  Do you know much about Warren Buffett? He is one of the three richest men in the world. He has created an immense amount of value for himself, but also for other people, due to his value based investment strategies. He's not a Carl Icahn corporate raider -- he's a businessman who looks for value and ways to increase value. That's a tremendously valuable individual to society. As a fellow entrepreneur, I have read and found inspiration in his philosophies and accomplishments. And that was before he went and promised 85% of his net worth to charities (Bill and Melinda Gates foundation, I believe) upon his death. Near as I can tell, that's over $30 billion dollars of wealth that he has created that he is now giving away. I agree that you cannot expect unbiased information from anybody these days. But it's not fair to single out Mr. Buffett, as he certainly isn't the type of rich man you want to paint with that brush.
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greengarstudios 16y ago
Actually, the root cause of the financial crisis was the Federal Reserve's interest rate manipulation. This distortion creates moral hazard, encourages malinvestment, and causes companies to make bad decisions. http://www.campaignforliberty.com/article.php?view=650 http://www.campaignforliberty.com/article.php?view=650
davidj 16y ago
The real story here is that government was holding up billions in payments to Warren Buffett from Goldman Sachs as blackmail until he caved in to write an article favoring the governments action. Warren Buffett is the modern day Hank Rearden, where in Atlas Shrugged Hank Rearden assets were stolen by the government and eventually used to blackmail him to work with the government.
bill186 16y ago
I'd rather hear from Uncle Sam's grand children than his nephew. Dear Sammy Children have to trust that their elders carry the wisdom of thier age and thoughtfully apply it when faced with trying circumstances. We trust that you will do the right thing and protect and safeguard our future. For each generation to leave a legacy that enables the next generation to continue to have a chance prosper and pursue its dreams. During the financial turmoil culminating in the financial crisis of 2008 you broke that trust. You sold out future generations to save a priviliedged few. You lied to the people to hide your failures and to protect your own fortunes. In order to avoid facing difficult problems and dealing up front with the people of that time, you chose to steal from future generations so you could continue with the graft, greed and lies upon which you and the favored select few built your empires. All the while just shifting the burden of your selfishness to us, your children. Well thank you for bankrupting our future! Now we are now saddled with debt that can not possibly be repaid. We have have limited hope of growing and developing ourselves and providing for our families. There is little opportunity for building our own dreams because we are overwhelmed with tax burdens, failed governement services, scarce and expensive resources, as well as world turmoil and general social unrest. Our currency, tattered and beaten, has been left a former shell of what it once was worth. People have largely given up because there's little incentive to build something of your own when most of the fruits of one's labor must go back to you Sammy to pay for past excesses or to help the masses of less fortunate that now exist b/c jobs and oppotunites are few and far between. So I hope you, your nephew Warren and the other priviledged few got to party it up while it was good because if there is a god you'll all rot in hell for your shamelessness. Signed your destitute and dejected grand child

111 points by jakarta 16y ago

Perhaps the government did avert a short-term disaster. But it's unremarkable that they distributed billions to companies who effectively held taxpayers hostage, threatening "if we go down, you go down with us." There was no way to not give out money without incurring intolerable short-term pain. I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies.

RtodaAV 16y ago
They should have saved Lehman Brothers.
- cdavid 16y ago
  Why the downvote ? I believe it is pretty much agreed on that letting lehman brothers fall was a mistake - of course, saying it afterwards is easy.
  - borism 16y ago
    because this is not particularly popular opinion in extremely libertarian tech circles, no matter what people more knowledgeable about those things say.
  - thasmin 16y ago
    Where can I find details about this?
    - cdavid 16y ago
      I read mostly on French ecoblogs, but in English: - http://delong.typepad.com/sdj/2008/09/a-very-large-in.html - http://www.nytimes.com/2009/09/12/business/12nocera.html?_r=1&hp You can find much more if you look a bit. I think outside the libertarian on the fringe, most people agreed the decision was certainly not obvious to make at that time. I am sure it will take time before academics agree (if ever:) )on whether this was a mistake or not.
pedrocr 16y ago
> There was no way to not give out money without incurring intolerable short-term pain. Sure there was: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html http://www.nytimes.com/2008/09/23/business/worldbusiness/23k... The Swedes actually solved this by nationalizing all the failing banks, wiping out the equity holders, restructuring and privatizing again. It ended up not costing much. In the US a bunch of bankers got huge bailout funded bonuses and the banks are far from solvent even now.
- nl 16y ago
  But they had one incredibly useful attribute that the US government didn't have: time. They had time to extracted pounds of flesh from bank shareholders before writing checks, time to design policies to force banks to write down losses and issue warrants to the government 2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months.
  - borism 16y ago
    There were 7 months between Bear Stearns (Feb '08) and Lehman (Sep '08) events, and things started to go downhill long before that - August 2007 in particular was the turning point. Many in the US were simply asleep at the wheel, both in government and private sector.
  - pedrocr 16y ago
    >2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months. Looking this up in Wikipedia it seems the crisis started in early 2007 and Lehman collapsed in September 2008. So there was a year and a half to plan a response. http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financial_market_impacts.2C_2007 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financ...
    - nl 16y ago
      Yes and no. Yes, there were plenty of signs of the sub-prime crisis. However, no one expected it to cause an investment bank like Lehman to collapse. It wasn't until the day of the crash that the people begun to dig into how the mortgages had been repackaged and sold, and it still wasn't widely know how badly the ratings agencies had failed in their analysis of this. (Ok, so it seems likely that Goldman had a fair idea and possibly went short Bear Sterns based on their exposure, but they weren't exactly spreading that information around)
JesseAldridge 16y ago
> I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies. http://en.wikipedia.org/wiki/Obama_financial_regulatory_reform_plan_of_2009 http://en.wikipedia.org/wiki/Obama_financial_regulatory_refo...
marcamillion 16y ago
That's the vagaries of capitalism. Can't have your cake and eat it. Once you believe in Capitalism, there will always be systemically important companies - whether it is Google, Amazon, etc. or Banks - that should something go wrong with them will require a bailout of some nature.
- arethuza 16y ago
  I'm all for capitalism, but if there are companies which fall into the "too big to fail" camp I want them split up and/or their management put on special notice that if the companies do fail then the taxpayers will be coming after the assets of the the executives should the company fail. NB I really don't think that applies to Google or Amazon.
  - marcamillion 16y ago
    If Google went down...literally overnight, thousands if not hundreds of thousands of small businesses that rely on AdSense to pay their bills would be in serious hot water. Not to mention those companies that rely on Adwords to drive traffic through their doors (both online and offline). I can almost assure you that the markets would get very jittery and irrationality would likely spread to all sorts of other industries. It is easy to take these things for granted. Amazon is the same. There are thousands of mini-retailers that earn a living on Amazon. Amazon might even be more so - the equivalent of a Walmart going down....but almost worst. At it's extremes, the beauties of capitalism lead to large firms that build ecosystems to entrench their positions - whose failure would be significant and potentially systemically dangerous. It is the nature of capitalism - it actually is very healthy for the system. Over time they eventually fade out and other large companies come and take it's place - e.g. the newspaper industry, telecom, etc. So you can't really escape it.
    - arethuza 16y ago
      No doubt that would be really bad - don't get me wrong - but it's not quite at the scale of what almost happened in 2008.
    - 16y ago
guelo 16y ago
Most of the $700 billion TARP money was recovered, the costs are only going to be about $30 billion which is a bargain for what it achieved. http://finance.yahoo.com/banking-budgeting/article/110920/exclusive-treasurys-tarp-aig-bailout-costs-fall-to-30-billion?mod=bb-budgeting&sec=topStories&pos=main&asset=&ccode= http://finance.yahoo.com/banking-budgeting/article/110920/ex...
deleted 16y ago
[deleted]
asmithmd1 16y ago
What I don't understand is why they didn't break-up any banks that were "too big to fail" into pieces that were small enough to fail. Instead they did the exact opposite, arranging shotgun marriages for failing institutions so they are now part of a bank that is too big to fail. The Justice dept. has very successfully broken apart companies in the past: http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Standard_Oil#Breakup http://en.wikipedia.org/wiki/Standard_Oil#Breakup No government ownership is involved; one day you own 1 share of AT&T and the next day you own 1 share of the new AT&T and 1 share of each of the new baby bells. I would argue the AT&T break-up allowed the first internet boom to happen. Can you imagine how hard it would have been to get a T1 provisioned if there had been no competition AND AT&T was offering a service just like what you were trying to start
- Benjo 16y ago
  You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks? If you put them all in one place, that bank would fail and still cause the same chain reaction, except the debt would fail entirely on the customers of the bank instead of the bank itself. If you spread out the assets, then you'd just have lots of smaller banks fail instead of the larger bank. I suppose doing this could have spread the failures out over time.
  - asmithmd1 16y ago
    By all means put out the fire by doing what they did in the moment. But then respond not by passing ineffectual legislation that will surely be gamed and circumvented but with stress testing the banks to see which ones are too big too fail and breaking them up until they are small enough to fail. As to who gets the "toxic" assets, who cares? They are all but worthless. Auction them off to whoever will buy them that way we no longer have this fiction that they will ever be worth anything. The US tax payer is now explicitly on the hook for these assets. The sooner we know what they are truly worth the better.
    - 16y ago

watchandwait 16y ago

Warren Buffett's corrupt Moody's credit rating business is at the heart of the financial crisis. Funny he didn't mention that. http://voices.washingtonpost.com/economy-watch/2010/05/credit_rating_agencies_the_rea.html http://voices.washingtonpost.com/economy-watch/2010/05/credi...

gg25 16y ago
Nice straw man attack. How does that have anything to do with his argument that Uncle Sam helped calm one of the biggest economic crises in history? Also implying that Moody is corrupt is asinine. Yes, they made mistakes (what credit agency didn't during the housing bubble?), but they didn't break any laws.
- zoomzoom 16y ago
  Would hardly call it asinine. There is a difference between illegality and corruption, and many would argue that us lawmakers have legalized bribery in the financial sector. You may disagree, but that doesn't make the viewpoint ignorant.
  - pwhelan 16y ago
    The implication, however, is that they were doing something shady that the rest of the credit rating agencies were not -- which is incorrect.

kqr2 16y ago

In the interest of full disclosure, Warren Buffett should have mentioned that he will probably make about $3.5 billion off a $5 billion investment (70% return) in Goldman Sachs. Goldman Sachs in turn received $13 billion via the AIG bailout. http://www.bnet.com/blog/financial-business/how-warren-buffett-8217s-gamble-on-goldman-sachs-paid-off-big/8326 http://www.bnet.com/blog/financial-business/how-warren-buffe... http://articles.latimes.com/2009/mar/21/business/fi-aig-goldman21 http://articles.latimes.com/2009/mar/21/business/fi-aig-gold...

varjag 16y ago
The assets of Berkshire Hathaway though are US$ 297.119 billion, per Wikipedia. He certainly has the vested interest in GS revenues, but perhaps not as much as you imply.
- pierrefar 16y ago
  Are you suggesting $3.5b are not worth mentioning?
  - jcmoney 16y ago
    Sure $3.5b is a lot of money and worth mentioning; but just that alone is somewhat misleading considering it's a very small fraction of Berkshire Hathaway.
  - varjag 16y ago
    No, what I suggested is that Golfman Sachs revenues do not make it or break it for him. The guy is very rich. Thus it is unlikely that mere 3.5 billion would affect his public statements, especially expressed in such an indirect and convoluted way as praising the U.S. government.
nl 16y ago
Perhaps he should have disclosed it. But at the same time it's difficult to find any serious investor with a mildly diversified portfolio who didn't benefit from the government intervention (from reduced losses if nothing else) Do you have 401K? I bet that has some money in Berkshire Hathaway and/or Goldman Sachs. Do you need to disclose that?

joelmichael 16y ago

I agree with Warren. The government handled the crisis very well, with the possible exception of allowing Lehman Brothers to fail. It's pretty remarkable, really, and it's unfortunate populist cynicism opposed the saving of the economy.

stretchwithme 16y ago

What is the great disaster that was supposed to have befallen us had Secretary of Treasury Hank Paulson and former CEO of Goldman Sachs not gotten his $700 million slush fund? Certainly many of those placing their bets on the collapse of housing bubble would not have gotten paid by AIG, but how does that cause the rest of the economy to collapse exactly? Yes, your investments would certainly have experienced losses as the companies doing all the stupid things dropped in value once their folly was fully revealed. But isn't dumb behavior and blind faith in casinos supposed to be punished? Instead of that righteous outcome, the costs are no being dumped upon millions who had nothing to do with all of the stupidity. And the reckoning has merely been postponed and perhaps will grow even larger now that they have been encouraged to continue taking foolish risks. Personally, I think Warren Buffett knows better.

rmah 16y ago
"What is the great disaster that was supposed to have befallen us..." Simply put, the thesis is that the entire world economy would have collapsed. It would have started with most of the investment banks being unable to do business and shutting their doors. This would have caused a chain reaction other parts of the financial system since the big money-center banks provide much of the overnight lending liquidity for smaller banks (and each other). Banks would start failing at an incredible rate. As the banks started to fail, the equities, bond and commodities markets would have collapsed. All these markets rely on short term lending, not just for leverage, but to underwrite transactions. Even if this were not the case, much trading volume would have dried up. This combined would have led to a crash in those markets. Finally, and most importantly, most businesses rely on lines of credit and other short term debt facilities to finance day to day operations. They use this to smooth out the cash flow when buying raw materials/inventory, purchasing assets and meeting payroll. These would have all been effectively frozen. You would have either seen paychecks becoming worthless or massive layoffs within a few weeks to a few months of the initial bank collapses. By massive, I mean a spike of an additional 10% to 20% unemployment within a few weeks or months. I won't go into the effect all this would have on currencies and international trade. All told, it would probably have plunged the entire world into a depression that would have rivaled or exceeded the Great Depression of the 1930's. It likely would have been worse because of the interconnectedness of the world's financial and commercial systems today.

Towle_ 16y ago

Long live the Austrian School. Nothing else makes sense.

borism 16y ago
Right! Everything else uses math, and math is HARD! http://en.wikipedia.org/wiki/Austrian_School#Criticism_of_the_Austrian_School http://en.wikipedia.org/wiki/Austrian_School#Criticism_of_th... Critics have concluded that modern Austrian economics generally lacks scientific rigor,[10][12] which forms the basis of the most prominent criticism of the school. Austrian theories are not formulated in formal mathematical form,[108] but by using mainly verbal logic and what proponents claim are self-evident axioms. [10] Caplan, Bryan. "Why I Am Not an Austrian Economist". George Mason University. Retrieved 2008-07-04. "More than anything else, what prevents Austrian economists from getting more publications in mainstream journals is that their papers rarely use mathematics or econometrics, research tools that Austrians reject on principle...Mises and Rothbard however err when they say that economic history can only illustrate economic theory. In particular, empirical evidence is often necessary to determine whether a theoretical factor is quantitatively significant...Austrians reject econometrics on principle because economic theory is true a priori, so statistics or historical study cannot "test" theory." [12] White, Lawrence H. (2008). "The research program of Austrian economics". Advances in Austrian Economics (Emerald Group Publishing Limited): 20 [108] Walker, Deborah L.. "Austrian Economics". Library of Economics and Liberty. Retrieved 2010-01-23.
- CamperBob 16y ago
  Well, there's some low-hanging fruit in that article. What branches of economics do rest on scientific rigor?
  - borism 16y ago
    true, there are a lot of axioms in many branches of economics that noone is allowed to touch, some have more, some have less. But AFAIK nowhere as much as in Austrian School today.
  - 16y ago

jswinghammer 16y ago

When the next round of problems start up this is going to look pretty funny. There is another wave of credit problems coming and the banks are vulnerable to all of the same downside risk they were before all this started. In 1931 the establishment thought they solved the problem and that things would get better soon. The collapse of the Austrian bank Creditanstalt proved them wrong and started a new series of problems.

ungerik 16y ago

I think you can't expect unbiased information regarding to money from one of the 3 richest men in world.

Travis 16y ago
Do you know much about Warren Buffett? He is one of the three richest men in the world. He has created an immense amount of value for himself, but also for other people, due to his value based investment strategies. He's not a Carl Icahn corporate raider -- he's a businessman who looks for value and ways to increase value. That's a tremendously valuable individual to society. As a fellow entrepreneur, I have read and found inspiration in his philosophies and accomplishments. And that was before he went and promised 85% of his net worth to charities (Bill and Melinda Gates foundation, I believe) upon his death. Near as I can tell, that's over $30 billion dollars of wealth that he has created that he is now giving away. I agree that you cannot expect unbiased information from anybody these days. But it's not fair to single out Mr. Buffett, as he certainly isn't the type of rich man you want to paint with that brush.

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greengarstudios 16y ago

Actually, the root cause of the financial crisis was the Federal Reserve's interest rate manipulation. This distortion creates moral hazard, encourages malinvestment, and causes companies to make bad decisions. http://www.campaignforliberty.com/article.php?view=650 http://www.campaignforliberty.com/article.php?view=650

davidj 16y ago

The real story here is that government was holding up billions in payments to Warren Buffett from Goldman Sachs as blackmail until he caved in to write an article favoring the governments action. Warren Buffett is the modern day Hank Rearden, where in Atlas Shrugged Hank Rearden assets were stolen by the government and eventually used to blackmail him to work with the government.

bill186 16y ago

I'd rather hear from Uncle Sam's grand children than his nephew. Dear Sammy Children have to trust that their elders carry the wisdom of thier age and thoughtfully apply it when faced with trying circumstances. We trust that you will do the right thing and protect and safeguard our future. For each generation to leave a legacy that enables the next generation to continue to have a chance prosper and pursue its dreams. During the financial turmoil culminating in the financial crisis of 2008 you broke that trust. You sold out future generations to save a priviliedged few. You lied to the people to hide your failures and to protect your own fortunes. In order to avoid facing difficult problems and dealing up front with the people of that time, you chose to steal from future generations so you could continue with the graft, greed and lies upon which you and the favored select few built your empires. All the while just shifting the burden of your selfishness to us, your children. Well thank you for bankrupting our future! Now we are now saddled with debt that can not possibly be repaid. We have have limited hope of growing and developing ourselves and providing for our families. There is little opportunity for building our own dreams because we are overwhelmed with tax burdens, failed governement services, scarce and expensive resources, as well as world turmoil and general social unrest. Our currency, tattered and beaten, has been left a former shell of what it once was worth. People have largely given up because there's little incentive to build something of your own when most of the fruits of one's labor must go back to you Sammy to pay for past excesses or to help the masses of less fortunate that now exist b/c jobs and oppotunites are few and far between. So I hope you, your nephew Warren and the other priviledged few got to party it up while it was good because if there is a god you'll all rot in hell for your shamelessness. Signed your destitute and dejected grand child