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A New Take On Buffett's "Dear Uncle Sam"... This Time Without The Skidmarks
Yesterday we all had the displeasure of reading the latest piece of sycophantic brownnosing by what has become everyone's most hated hypocrite. Today, the brilliant Sean Corrigan of Diapason Securities strikes again with the letter that should have been written. We hope someone of greater repute (not to mention circulation, reach and net income) than the NYT will grow some balls and post this.
Dear Uncle Sam,
My mother told me to send thank-you notes promptly. I've been remiss, but you know, with my firm's revenues up 30% and its net income up nearly threefold since the Crisis struck, I thought I'd better be careful in case anyone considered my praise was a little less than disinterested.
Just over two years ago, in September 2008, the country faced an economic meltdown. Fannie Mae and Freddie Mac, the corrupted, corporatist rent-seekers you had long encouraged to disrupt the proper allocation of scarce means in the mortgage system in the lust for venal political advantage, had been forced into 'conservatorship' (i.e., they were permanently battened on the teat of the long- suffering tax-payer). Several of the largest commercial banks were teetering as a result of their leaders' blind pursuit of short-term gain in the regime of extreme moral hazard instituted by you and your central bank. One of Wall Street's giant investment banks had gone officially bankrupt, and the remaining three were poised to follow (at least until you allowed them to practice the legal fraud of what I then called 'mark-to-myth' in assessing their net worth) — but, of course, the full impact of flouting the eternal capitalist imperative of loss- avoidance and profit-seeking could not be allowed to be borne by them, now could it? Fortunately, the fact that AIG, the world's most notorious mispricer of credit risk, was at death's door offered you a way to make those same investment banks nearly whole through the back door. I believe the gamblers-in-charge who needed such unheard of levels of assistance are largely still in place and still making out like bandits at the expense of everyone else. Way to go!
Many of our largest industrial companies, foolishly over-reliant on hot-money, short-term financing via a commercial paper market that had disappeared up the tail-pipe of the mythical 'global saving glut' were weeks away from exhausting their cash resources. Indeed, all — well, many — oh, alright: some of the most badly run - of corporate America's dominoes were lined up, ready to topple at lightning speed. My own company might have been the last to fall — since I am not only a recognised investment genius, but very thick with a number of your more influential servants - but that hypothetical distinction provided little solace with even my stock price back at 1998 levels, before reckoning for inflation or the weaker dollar.
Nor was it just business that was in peril: 300 million Americans were in the domino line as well and it is, of course, not just a constitutional right, but a precept of natural law, that you must act as that vast, tutelary deity of whom de Tocqueville spoke when you were still little more than a lad and so spare the improvident, the indolent, and the plain unfortunate the consequences of their actions, even if it costs the thrifty, the industrious, and the innocent very dear in the process. Just days before, the jobs, income, 401(k)'s and money-market funds of these citizens had seemed secure. Then, virtually overnight, everything began to turn into pumpkins and mice — but, then again, if you take my strictures (q.v., below) about 'bubbles' into account, maybe they were nothing more than Bibbedy-bobbedy-boo all along (except where they held shares in MY company, of course). There was no hiding place. Thanks to your misplaced efforts in trying to keep a lid on the volcano for at least the previous decade (some would say ever since the early 1930s), instead of allowing it to depressurize in its own good time, a destructive economic force unlike any seen for generations had been unleashed.
Only one counterforce was available, and that was you, Uncle Sam. Yes, you are often clumsy, even inept (allow me a little euphemism here: I'm trying to be nice). But when businesses and people worldwide race to get liquid, you are the only party armed with the printing press and primed with an utter disregard for the long term consequences of using it and so can take the other side of the transaction. And when our citizens are losing trust by the hour in institutions they once revered — institutions which you fostered, pretended to regulate, and from which you continue to take hefty political contributions - only you can prop up a house of cards of your own construction.
When the crisis struck, I knew you would not waste the opportunity to expand the role you could play — Crisis and Leviathan, and all that. But you've never been known for speed, and in a meltdown minutes matter. I worried whether the barrage of shattering surprises would disorient you. Absent any guiding principles, drunk on the unbridled power of executive privilege, and utterly contemptuous of due process, you would rush ('like a fire-engine going the wrong way down a one way street') to improvise ill-thought out - and often conflicting - solutions on the run, violate legal boundaries and avoid constitutional inconveniences, like Congressional hearings and studies. You would also need to get turf-conscious departments to work together in mounting your counterattack. Ah, well, better luck, next time! The challenge was huge, and many people thought you were not up to it - who says you should always discount the consensus?
Well, Uncle Sam, you delivered. Oh boy did you deliver! People will second-guess your specific decisions; you can always count on that, just as you can count on the resulting uncertainty about exactly what stunt you're gonna pull next to paralyze entrepreneurial decision-making and so prolong the slump far beyond its natural span. But just as there is a fog of war, there is a fog of panic and under its veil you certainly did a number of things which would not stand up to scrutiny in the unlikely event you ever honoured a FOIA appeal to reveal exactly who did what to (or for) whom and why. Overall, your actions were remarkably effective in taking the failure of a few egregiously over-leveraged, private- sector companies and magnifying it into a global collapse, passing the losses of the billionaire financier class onto the individual saver and the small businessman, wherever they might be found.
I don't know precisely how you orchestrated these - certainly, the noise that came out was much more Berg than Bach. But I did have a pretty good seat as events unfolded (don't I always?), and I would like to commend a few of your troops. In the darkest of days, Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair finally grasped - after much prior public denial - the gravity of a situation in whose development at least the first three had been actively instrumental. As for dear ol' Dubya, I give him great credit for leading, even as Congress postured and squabbled, for if there's one thing that sells tickets in this Theatre of the Absurd, it's Leadership (capitalized, naturally, just like Fuhrerprinzip), even if too few care to check quite where they are being led until it's far too late to do anything about it.
You have been criticized, Uncle Sam, for some of the earlier decisions that got us in this mess — most prominently for not battling the rot building up in the housing market (though to limit ourselves to this narrow field is to deny much of the discredit due you). But then, few of your critics saw matters clearly either (even though several of them now tediously hog the headlines by pretending that they did) since, they, too, are all Neo-Keynesian, macroeconomic-aggregate astrologers with no real grasp of economic theory. In truth, almost all of the country became possessed by the idea that home prices could never fall significantly - a mania which never could have taken hold had we had abolished the Fed and put in place an honest monetary system, of course. (Since you ask, my S&P put shorts and my bearish USD position are again doing quite nicely, thanks).
That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles. And when bubbles pop, they can generate waves of trouble that hit shores far from their origin. This bubble was a doozy and its pop was felt around the world. Thank the Lord, you've been trying might and main ever since to reinflate a new one on the wreckage of the old (see my comments about pumpkins and
mice, above).
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 (this is meiosis, not euphemism, in case you were wondering). But in this extraordinary emergency, you came through — and the world would look far different now if you had not. What a shame we'll be picking up the multi-trillion tab for that utterly ill-advised intervention for many a long year to come (I use the term 'we' loosely, of course, since I'm reaping what I did not sow as per usual).
Your grateful nephew, W
PS: Do I get my nice, shiny new medal now, please?
PPS: Please excuse the shocking punctuation, left largely unamended by the editorial staff at the nation's premier newspaper.
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You really have to learn to spell his name correctly.
This letter is good but Ritholtz's letter yesterday is better - Dear Uncle Sucker.
any yet the MSM will continue to hold him up as an idol
"No more country for old men"!!!
Tuesday's losses nearly erased.
GM has traded over 295 million shares already
The veins in Karl Denninger's neck must be exploding right now.
I thought he was still in traction after getting thrown from the pickup on the way to bear'fest 2010 .... ?
LOL, yeah Denninger, another DOPE who's been calling for armageddon now for what, 5 years or so ?
i bet his blood pressure gotta be higher than the gold price by now
yeah and how much of it went into Bennie's and Obummers personal PPT account? Why not buy that shit, do you think they're going to let it fail now?
Ignore Karl's warnings at your own peril. Besides, he's not the only one who's sounding the alarm [e.g., Nenner, Prechter, Laundry, Rosenberg, Kondratiev ... okay, so Nikolai is speaking from the grave but it still counts].
Fantastic!
Great Piece.... You know what really bugs me about the whole thing is, We poured (bailouts) all this money into the economy and where has it gotten us? We are worst off today than we were 2 years ago when we in the crash. Tons of places just took the stimulus money and after its gone, closed up. I wouldn't be going around braging about how good they have done until I actually saw some results. Just my 2 cents haha
Oh, but it would have been much worse than 30.5% defacto unemployment if they hadn't bailed out Wall Street and stiffed homeowners and taxpayers
<Sarcasm off>
Fact is, silver far outperformed BRK the last decade
Oh wait, he sold his to buy Allied Irish Bank and COP?
Brilliant header, brilliant intro (so many sucker punches) and brilliant riposte to the old banjo strumming uncle's disgusting (unbelievable, I was so sure I was reading a spoof yesterday, till I realized it was for real, and it was not anywhere near April 1st) open letter.
Awesome!
ORI
http://aadivaahan.wordpress.com
w.b. = uncle fucker
http://www.youtube.com/watch?v=6UMaTg3lSf4
A picture is worth a thousand words...
...."another DOPE who's been calling for armageddon now for what, 5 years or so".
http://www.huffingtonpost.com/2010/10/07/images-of-the-foreclosure_n_754272.html#s151779
The only things capable of puncturing the bubble of the elites are bullets. They live in a rarified world where they can neither hear, see or touch us, not that they would ever mingle with the masses.
It is as it has always been. Yet, it is the masses that are it's staunches defenders. That is the beauty of mass mind control and conditioning. Like people in a virtual reality simulator, we think we are free.
When in reality, we are hooked up to machines of labor, fed inexpensive gruel, clothed in rags, until our ability to produce is exceeded by the cost to maintain us- then we are triggered with disease and left to die.
Then we give them medals and celebrate their philanthropy. You can't make this stuff up...
altogether elloquent ... nicely done ...
I guess our system is an improvement since, if you are greedy and amoral, you too can join the oligarch club. It's not a closed society, it just has unique qualifications for entrance that individuals with a soul and/or conscience, or even a vague sense of social justice, would find hard to surmount.
Buffett The Puppet. He's just as greedy as Wall Street. The only difference is at least Goldman Sachs does not try to hide it.
And for his efforts to restore faith in the American, he gets the Congressional Medal of Freedom - along with Bill Russell and Yo-Yo Ma.
give him the Nobel, he doesn't deserve a real medal
Dirty.
Derivatives are financial weapons of mass destruction.
Warren Buffett
DEAR Grandpa Oligarch,
My mother also told me to send “Congratulations” cards promptly. I’ve been remiss.
Thank you for publishing your letter today. Let me remind you, also, of why I’m writing you today. Just over two years ago, in September 2008, our country faced an unexplained and sudden economic meltdown. The first questions to ask is, how? The second is, why?
For exactly how did we get ourselves into such a hidden economic meltdown position in the first place? The next question I ask is, who benefits most from the above mentioned financial meltdown position…and how did they benefit or protect themselves, their friends, and family with properly maintained, adequate, and prudent risk controls that failed everyone else.
I’ve asked myself these questions many times now, over and over, for how could Capitalism and its Darwinian cousin of risk control not function better, and to have disappointed us all so. Disappoint in fact, and to such a large degree, that the entire free world was suddenly and entirely insolvent, and filing for bankruptcy on Monday morning without Government financial support from taxing wealth away from its’ hard working citizens.
So, it wasn’t truly an economic meltdown, but it was rather a financial liquidity shakedown event.
Fannie Mae and Freddie Mac, (who were both indirectly, yet instrumental, in supplying the Bankster’s and yes Berkshire’s main engine for creating macro demand growth for its’ suite of products and services), were also incorrectly perceived by all as strong government sponsored entities, and had been falsely rated by one of your Moody holdings, and seen as financial pillars that were in fact always “broke” without the much-needed aid of taxpayer assistance. Capitalism never truly supported them for good reason, for Gmen would, and as a result, by not having adequate regulation or supervision of our entire mortgage land chattel and legal system of the courts, they had to be forced into conservatorship.
At that same time, several of our largest commercial banks were teetering (for some reason / who even cares) – the one you own, Far FromWell, was even paying more for overnight capital. One of our largest Wall Street competitor, a giant investment bank, had recently gone bankrupt (for some reason-who cares), and the remaining three were poised to follow like falling dominoes for they were not regulated to avoid common disasters (for some reason/who cared), apparently. A.I.G., the world’s most infamous insurer, was also at death’s door due to poor risk management and self-destructive tendencies that we will not discuss at this time. But why, and how, can they all be broke, at the same time, you might ask?
Well, many of our largest industrial companies, your payroll even, are dependent on commercial paper financing. That one, specific, source of capital for most companies suddenly dried up and had disappeared. At this point, we were weeks away from companies exhausting all their cash resources, resources (credit facilities) that the bankers controlled were pulled just in time for a ransom note.
The next step was an important one. One Problem – but with many possible solutions and outcomes but with ultimately only one option being discussed and voted upon (Taxpayer’s $800,000,000.00). What if we would have initially ring-fenced the bad (busted and bankrupt) banks (including bad iBanks), and on that fine Monday morning, instead open up, as a new $1.6 Trillion dollar (50% private sourced capital/50% government guaranteed capital) lending source of mortgage, business, and payroll capital.
The result, new overnight tapes downloaded from old (bad) banks to these new (good) banks – who would also be paying 4.5% APR to attract and win your savings, with the end result of having good new ibanks taking over from likely corrupt, insolvent, non-lending bankrupt ones. See, no immediate meltdown – but no shortage of issues either as it still is a hard “reset” moment short-term but how is this decade going to change in the longer term with these type of choices being made in the past?
Indeed, all of corporate America’s dominoes were lined up, almost as if on purpose, ready to topple at lightning speed on a moment’s notice – as they always seem to be during a period of confiscation. Although your own company, Berkshire Hathaway, might have been the last to fall, maybe it should have been the first, for without proper risk controls it may not have lasted and be here today without public government funds providing counterparty-risk protection and last-minute taxpayer intervention.
Slide up close to the fire and let me tell you a story. It was just not business that was in peril: 300 million Americans were in the domino line as well. Just days before, the jobs, income, 401(k)’sand money-market funds of these citizens had seemed secure to the taxpayer lemmings. Then,virtually overnight, everything began to turn into pumpkins and mice.There was no hiding place. A destructive economic force unlike any seen for generations had been unleashed. Boooo! Now wake up, Uncle Sam, for it was all a Bankster’s dream. Delusions, whether about tulips or Internet stocks, produce bubbles.
So, again, Grandpa Oligarch, thanks to you and your Gmen counterparty aides. Often you are revengeful, and sometimes you are bullying. On occasion, you are down right maddening to the investor class. But in this extraordinary emergency, you came through better and stronger than you should of – with the aid of my tax money and I wonder if the U-6 unemployment rate would also have looked far different today if we had free market interest rates.
Your grateful grandson who, as of today, now owes exactly $176,074 according to the US Debt Clock,
ContraMan
www.contramanfund.com
p.s. After the NYT Op Ed, an award to boot: http://www.reuters.com/article/idUSTRE6AG4MU20101117
Holy shit Robot Trader, that clip was the funniest thing I have ever seen on ZH.
And that is saying something. If you are reading please, please post the pickup
bear-crash again. It made my (rally) year.
Uncle Warren Without Skidmarks???
Government Welfare Ho Warren fired Charlie "Skidmark" Munger???
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