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Buffett Loses A Bet, Fails To Pay... Again
On a day full of exultation for The Oracle of Omaha, we could not help but see the irony of Warren Buffett losing yet another bet and not paying up...
The two richest men in the world face off. Buffett doesn't pay up. pic.twitter.com/m0PMUZpWWU
— Chris Dignam (@Chris_Dignam) May 2, 2015
Now where have seen this before? Rolfe Winkler explains... Buffett's Betrayal... (from 2009)
When I was 14, Warren Buffett wrote me a letter.
It was a response to one I’d sent him, pitching an investment idea. For a kid interested in learning stocks, Buffett was a great role model. His investing style — diligent security analysis, finding competent management, patience — was immediately appealing.
Buffett was kind enough to respond to my letter, thanking me for it and inviting me to his company’s annual meeting. I was hooked. Today, Buffett remains famous for investing The Right Way. He even has a television cartoon in the works, which will groom the next generation of acolytes.
But it turns out much of the story is fiction. A good chunk of his fortune is dependent on taxpayer largess. Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.
Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.
To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. (Click chart to enlarge in new window)
Without FDIC’s debt guarantee program, even impregnable Goldman would have collapsed.
And this excludes the emergency, opaque lending facilities from the Federal Reserve that also helped rescue the big banks. Without all these bailouts, the financial system would have been forced to recapitalize itself.
Banks that couldn’t finance their balance sheets would have sold toxic assets at market prices, and the losses would have wiped out their shareholder’s equity. With $7 billion at stake, Buffett is one of the biggest of these shareholders.
He even traded the bailout, seeking morally hazardous profits in preferred stock and warrants of Goldman and GE because he had “confidence in Congress to do the right thing” — to rescue shareholders in too-big-to-fail financials from the losses that were rightfully theirs to absorb.
Keeping this in mind, I was struck by Buffett’s letter to Berkshire shareholders this year:
“Funders that have access to any sort of government guarantee — banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella — have money costs that are minimal,” he wrote.
“Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that … are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.”
It takes remarkable chutzpah to lobby for bailouts, make trades seeking to profit from them, and then complain that those doing so put you at a disadvantage.
Elsewhere in his letter he laments “atrocious sales practices” in the financial industry, holding up Berkshire subsidiary Clayton Homes as a model of lending rectitude.
Conveniently, he neglects to mention Wells Fargo’s toxic book of home equity loans, American Express’ exploding charge-offs, GE Capital’s awful balance sheet, Bank of America’s disastrous acquisitions of Countrywide and Merrill Lynch, and Goldman Sachs’ reckless trading practices.
And what of Moody’s, the credit-rating agency that enabled lending excesses Buffett criticizes, and in which he’s held a major stake for years? Recently Berkshire cut its stake to 16 percent from 20 percent. Publicly, however, the Oracle of Omaha has been silent.
This is remarkably incongruous for the world’s most famous financial straight-shooter. Few have called him on it, though one notable exception was a good article by Charles Piller in the Sacramento Bee earlier this year.
Buffett didn’t respond to my email seeking a comment.
What saddens me is that Buffett is uniquely positioned to lobby for better public policy, but he’s chosen to spend his considerable political capital protecting his own holdings.
If we learn one lesson from this episode, it’s that banks should carry substantially more capital than may be necessary. You would think Buffett would agree. He has always emphasized investing with a “margin of safety” — so why shouldn’t banks lend with one?
Yet he mocked Tim Geithner’s stress tests, which forced banks to replenish their capital. Why? Is it because his banks are drastically undercapitalized? The more capital they’re forced to raise, the more his stake is diluted.
He points to Wells Fargo’s deposit funding model being more robust than investment banks’, but that’s no excuse for letting tangible equity dwindle to three percent of assets. At that low level, the capital structure would have collapsed were it not for bailouts.
And by the way, the strength of Wells’ funding model is a result of FDIC insurance, among the government subsidies Buffett complains about in this year’s letter.
To me this feels like a betrayal. There’s a reason he’s Warren Buffett and not, say, Carl Icahn.
As Roger Lowenstein wrote in his 1995 biography of Buffett, “Wall Street’s modern financiers got rich by exploiting their control of the public’s money … Buffett shunned this game … In effect, he rediscovered the art of pure capitalism — a cold-blooded sport, but a fair one.”
But there’s nothing fair about Buffett getting a bailout, about exploiting the taxpaying public for his own gain. The naïve 14-year-olds among us thought he was better than this.
What would Ben Graham say?
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The WHOREacle of Omaha!
Anyone else getting a "404 Page Not Found" error on the Sacramento Bee link...?
Same here. Remember the article is from 2009.
A fragment I found here http://www.americanthinker.com/blog/2009/04/warren_buffett_profits_heavi...
Ah, of course. I now see the '2009' date stamp. Read too quickly the first go 'round and missed it. Thx, malek.
Wonder just exactly how many congresscritters and senators and Fed.gov employees have their retirement tied up in BH?
I call dibs on his gold Rolex. Fuck you, Charlie.... no bullion for you.
It's probably fake just like him.
Paying for losses? That's what taxpayers are for.
With an ice cream cone in one hand and a hot dog in the other, Mr America fucks everyone in the ass.
Money buys great PR.
Love how you signed your name in the upper left corner, a little freaky :)
In your usual brutal style. I love it!
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To: abuse at zerohedge dot com
Subject: Please delete the spammer account "j reuter"
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To: abuse at zerohedge dot com
Subject: Re: Please delete the spammer account "j reuter"
Dear Tyler
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Need more Tyler's.
ot http://www.globalresearch.ca/malaysian-airlines-m17-canon-bullet-discove...
Let me guess, Putins wallet was lying right beside it......
Isn't that type of ammo explosive? Why would the shells still be intact?
Reminds me of the company owner and my ex-employer who invited me to lunch then claimed he had no money and I had to pay for both of us. What a bum.
Reminds me of a fellow worker that would go to group lunches where the bill was split evenly and then order up while everyone kept to a budget.
I called the sun of biatch on it the second go round.
How is he at washing dishes? We would have found out if I was there.
Looks like a Ukie air force roundel on the wing of the plane seconds later in the video.
The shell came from a shot-down Su 25. The insignia on the wing is visible at 1:51.
Well there's your problem, You thought he was better than this........
he he ha Ha HA HAA ha ha
Buffett: Eminence front for Zion.
https://www.youtube.com/watch?v=GnHLgxKUsEA
Liberty is a demand. Tyranny is submission.
Remember when BAC was trading at $1?
ZH'ers were like that's grossly overvalued.
it was. and now its more overvalued. true worth then was more like -$100/share.
awesome.
they are thieves and murderers, nothing new
great article. Love @LizClaman following him around with those big Jew tits of hers swinging out and about.
Was she too bisy to sit on her molesting daddys lap and abuse her mommy?
He's such a nice man just eating an ice cream cone. SATAN'S DISCIPLE.
i just hope he lives long enough to to see the crash
I hope he lives long enough to have a massive stroke and ends up lying in bed all day while Obama's jiz drips off his chin.
as his head rolls into the basket (channeling kchrisc)
No surprise here. Telling a story of hard and smart work sells better than cashing in on an upwards financial transfer.
What happened to Carlos Slim ? Is he no longer the richest person in the world ?
He forgot to cross into the US over the border without ID to apply for his bailout.
You feel me?
Typical addict... Buffett BAC warrants are like liquid financial crack.
Every picture I see of this clown............ He is perfectly lined up for me to knock him out with one punch
Does anybody believe Warren would have initiated the giveaway pledge if he wasn't dying of old age?. The disease of building or aspiring to build multi-billion dollar fortunes is at the root cause of many of the ills in our society today and Warren wins out hands down.
(FREE)Buffett & Mongrel = Burke & Hare
Buffet forgot to mention how Berkshire was miraculously spared the TBTF label (unlike nine primary insurance companies) which could have stipulated that it would have to hold more capital to cover unexpected losses...
Free access to FT article behind paywall here:
http://www.reddit.com/r/berkshirehathaway/comments/33fdqz/british_regula...
The "rich" 1% suckers need to pay for the excesses of the .01%
Billary is right in saying she will go after the 1% (at the behest of the %.01 who don't like competition...)
They will not keep that promise, and InTrade odds are guaranteeing they won't.
Since I can remember in my county Buffet is big into RE. Bigger now than ever. There was a lot of military business here up to Clinton, and secondary housing/population scale profits. if you knew what the green suits were planning.
Traitors dress as much as possible like saints.
In the midst of the financial crisis when Aon (sp? I might have the name wrong a huge insurance and financial company in the USA) was about to go under (shares down to 87 cents I believe) Buffet would have huge holding in derivatives and CDO that would would have fallen to zero and wiped him out - pleaded for its bailout.
He's too big to pay ;-)) he needs a Heart Adjustment >>> http://wp.me/p4OZ4v-20E
This is the same guy who says gold is just a lump of metal that can't do anything for you? Yeah, right . . . .
psychopaths never lose