A lot of people are going to be talking about this Warren Buffett NY Times Op-ed. Buffett writes a cutesie "Dear Uncle Sam," thank you note, commending the government for its great work managing the financial crisis.
"The challenge was huge, and many people thought you were not up to it.
Well, Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic — and, overall, your actions were remarkably effective.
I don’t know precisely how you orchestrated these. But I did have a pretty good seat as events unfolded, and I would like to commend a few of your troops."
There's something about this I find flat out disgusting. Oh yeah - Buffett himself was far from an impartial bystander in this whole mess - being a massive beneficiary of the government's generosity and willingness to subvert the capital structure. He likely even shaped some of the programs himself (see: Warren Buffett Invented the PPIP?).
So, while Buffett gushes:
"So, again, Uncle Sam, thanks to you and your aides. Often you are wasteful, and sometimes you are bullying. On occasion, you are downright maddening. But in this extraordinary emergency, you came through..."
I'm thinking that I'd really like to hear from the 15% of Americans (17 million families!) who had trouble putting food on their table in 2009 or the 14.8 million unemployed people.
I don't really want to read Warren Buffett's thank you to the government for bailing out his investments.
-KD
22 comments:
Always an angle, always.
Warren Buffett... multi-billion dollar capital infusion into Goldman Sachs (everyone seems to forget that one!)... discuss.
http://www.businessinsider.com/goldman-sachs-cant-pay-back-warren-buffett-fed-dividends-2010-11
According to the WSJ, before the government approves the payback, it wants new dividend increase policies to be in place. And even then, if it allowed Goldman to increase its dividend payments, it would probably need to forbid other, less healthy institutions from doing so. And it probably won't.
Which is too bad for shareholders! Because Berkshire's cash injection has already cost the bank $1 billion in dividend payments.
Chances are that the Fed's first approvals for banks to amplify dividends won't be issued until first quarter, next year. "Banks will need to show they can meet high capital hurdles before they can increase payouts to shareholders," according to a the Fed's governor, Daniel Tarullo.
I'm with you on this KD. It just reeks of self serving B.S., as has most everything he has said in public over the last couple of years.
"I did have a pretty good seat" - no shit
All through this he has sold his soul to protect his financial empire. I really wonder what he thinks when he's alone in a room. Has he deluded even himself about all this?
Funny, Barry's take on this very much parallels mine:
Dear Uncle Sucker
If I made billions on Goldman Sachs, I write them a thank you letter as well. Remember, he is chummy with the administration. he knows how to play the politics game.
We've got GM going public as a success story on the same day as Warren Buffett thanking the Government for saving his investments?
Can't take that much in one day.
More heroin please :)
KD,
I am a subscriber to your blog and I really enjoy reading your various critiques, which are almost always insightful, well-reasoned, well-articulated, and fair.
But I don't think that this particular posting lives up to your high standards, because it lacks the qualities mentioned above. What, exactly, is the argument in this post? You feel flat out disgusted--ok, why? Buffett was a massive beneficiary of the stimulus--ok, but of what consequence is that? Most of your readers are probably sufficiently well-informed to know that Berkshire benefited from the various bailouts and stimuli, so pointing that out is not in and of itself helpful. Your implication seems to be that Buffett's impartiality in the matter invalidates his opinions. That surprises me because in the past you have advocated that arguments be evaluated on their own merits, indepedent of the person of the speaker. In this particular case, you have attacked the speaker without reference to his argument. Buffett is one of the two richest men in America and the CEO of one of the largest companies in the world. How could he *not* have been a prime beneficiary of the stimulus? Is there any reasonably conceivable way his investments could have *not* been bailed out while the rest of the American economy was?
Like I said at the start, I really enjoy your blog. The world benefits from intelligent people like you spending considerable time and effort analyzing the world and sharing the result free of charge. I personally have benefited, and I am grateful for it. But I think that this particular post has little use or merit without further explanation.
Anon -
Buffett not only benefited, but helped craft the very bailout policies. It's gross. Instead of using hundreds of billions of dollars to prevent Buffett's stockholdings from being wiped out, the government could have better spent that money to actually solve the problem - not to bastardize the capital structure of the American Corporation. Doing so would have resulted in lots of pain to guys like Buffett - but perhaps we could have made progress in remedying the problem (which, by the way, is that banks have hundreds of billions of dollars of bad loans. abandoning realistic accounting of those losses doesn't solve the problem)
To your point: Buffett being a beneficiary doesn't mean he's wrong - that's true, which is why I hinted at the reasons he is wrong - the 15% of Americans who have food insecurity and the massively elevated unemployment...
"Your implication seems to be that Buffett's impartiality in the matter invalidates his opinions. That surprises me because in the past you have advocated that arguments be evaluated on their own merits, indepedent of the person of the speaker." I agree wholeheartedly with you - instead of writing another post about how fucked we are, i left it to the reader to judge just how "Great" of a job Uncle Sam has done in REALITY - aside from the Buffett Bailouts... I think the average American would have a pretty different view.
oh yeah - sure - now we'll have the "but if the government hadn't done anything, it would have been even worse" discussion. That's not the point. the point is that Buffett's fellationary (new word I just coined) letter doesn't really depict the common man's view or effect of the "recovery"
In the words of Winston Wolf from Pulp Fiction: "let's not start sucking each others' dicks just yet"
we've bailed out WB's investments - now all we have to do is address the record high poverty, food insecurity, and extended lengthy unemployment.
fellatory or fellatial?
http://itre.cis.upenn.edu/~myl/languagelog/archives/002815.html
One of my favorite lines: "It's the one that says 'Bad Motherfucker' on it."
Come on, KD. No venting of primal anger, just intensive analysis. That's what we're paying you for. That, and puppies and produce.
;-)
TZ - fellationary is when fellatio meets inflation. it's fellationary.
My initial reaction, like yours, was one of disgust, but then I thought--what better way to expose WB as a self-serving, sanctimonious hypocrite than through his own words. . .
And I felt better.
No, thank you, Warren Buffett. . .
Buffet used to be one of my heroes, but no more. He's turned into nothing more than a rent-seeker and a pimp for the current administration, all the while keeping his Uncle Warren persona
His partner, Munger, while equally disgusting, at least has the stones not to sugarcoat what he's about - he's made it clear that bailing out the banks (and saving his billions) pleased him a great deal and that the little people who are out of a job or getting kicked out of their hoomes should "suck it up".
I'll just add that at this rate, Buffet's reputation may end up sinking quicker than Greenspan's - no matter how much the state-run financial tv station (CNBC) pimps him.
scratch my back...
http://www.reuters.com/article/idUSN1710138620101117
Without the bailout, economic production and with it poverty and unemployment would be even worse. If you're looking for a villain here, look for the cowards in the executive and legislative branches who crafted much too small a stimulus package and wouldn't go back to the well when it became obvious that much, much more was needed. To the extent Buffet was part of this process, he has my opprobrium -- but this op-ed is harmless.
WCW - you wrote "Without the bailout, economic production and with it poverty and unemployment would be even worse."
that's indubitably true. But I'd expect someone as smart as you to realize that it's also largely irrelevant. proof: I can light a trillion dollars in cash on fire, and shout: "without us having burnt this giant pile of $100 bills, we wouldn't have had as much heat or light," but that doesn't mean that's the proper use for the money.
Why did we have amelt down of credit. Because with everything AAAAAAAA rated no one new what crap was and what was not so they wouldn t take any new paper . The system was coming to a screeching halt. Now they are useing the magic checking account to goose the economy.. How long before people start refusing those green little things that the FED is so fond of . More of the same old stuff . Just a different day
Your grade for ECO 101 Mr Buffet FFFFFFFFF rated
Scoremore,
If you live in the US, why would you refuse the dollar? What choice do you have? How are you going to pay your taxes without some dollars? In the future, you may want more dollars than you did before for the same item (inflation), but there is little evidence of that right now, despite Sarah Palin's claim.
P.S. - Buffett's rep went down immeasurably to me when he put Meg Whitman on the board. I don't trust the guy anymore. He used to have the "squeaky clean" rep. I think that's gone. I also don't think the breadth of his knowledge is all that great - he sees the world in a certain way, and that colors his opinions.
check this too:
http://www.minyanville.com/businessmarkets/articles/david-stockman-warren-buffett-general-electric/11/17/2010/id/31189
How did you distinguish between a man who sincerely believed that America faced a depression, and a man who simply didn't want his holdings to disappear? There doesn't seem to be any way to test the intention.
Regarding TARP, keep in mind that the short-term debt markets were on the verge of a total freeze as LIBOR-OIS passed 3%. The govt. and Buffett may have accepted deadweight loss as a necessary cost to combat animal spirits and an attendant deflationary paradox of thrift.
Regardless of the actual depression risk in 2008, I'm inclined to believe that govt./Buffett acted in good faith. The haphazard natures of the bailouts, guarantees, and asset swaps exhibit more panic than calculation.
But, then again, there's no obvious way to test the intentions.
Al - read the link I posted in the comment just above yours.
I'm not really trying to make any statement about good faith or lack thereof - I'm just saying that there are tens of millions of Americans who would strenuously disagree with WB's "Thank You" sentiment, as their problems haven't been fixed. Buffett's have, though...
KD, it isn't an unintelligent article, but it also doesn't seem to tackle what it purports to prove. The article looks at first order effects if CP lenders spontaneously forgave a major portion of their assets, in which case investors could reasonably assume a one-time extraordinary event and move on with life. But that ignores the importance of investor expectations. Investors ask "why?", and the answers they found at the time resulted in a $145 billion run on money market funds in the week between the Reserve Primary Fund falling below $1 per share and the federal bailout of money market funds. If you Bloomberg credit risk expectations at the time I think you will find historic uncertainty in every measure.
The author also assumed a 1-year recover from 2008 in his discussion of available lines of credit, though a banking run seemed likely without govt. intervention. And his dismissal of the second-order effects of the collapse of the financial community, shadow and all, is too quick. The costs of matching lenders to borrowers rises incredibly fast during a panic; it's difficult to say how much damage would occur before savers feel comfortable letting go of their capital.
The frustration of people like yourself and the author is understandable since the govt./Buffett argument is philosophical, rather than scientific. But the type of arguments used in that article simply rely too much upon available data at the expense of necessary data.
Al - you're going to talk about investor expectations? really? that's the biggest problem with the entire bailout - investor expectation have been RUINED (to the upside, though - which is why i used the word bastardized instead, earlier). Which is to say, investors expect to be bailed out.
By the way - the primary fund didn't break the buck because of investors wanting to redeem - it broke the buck because its assets were bad! solvency vs liquidity - a key, still misunderstood problem in the crisis.
of course, the prudent, like me, got penalized for withdrawing our money (before the shit hit the fan) from higher yielding money market accounts and putting in in lower yielding, SAFER, savings accounts.
but again - all that is off topic.
tens of millions of Americans will take serious issue with WB's bs "Thank you, it's all better" note. And just because TARP > NO TARP doesn't mean TARP was the right way to do it.
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