a new perspective on Warren Buffett
Up until recently I had an image of Warren Buffett that I think is the mainstream one: simple man from Omaha who is single-minded about his investments such that he is very successful.
However, that image has changed for me. Rolfe Winkler from Reuters has compiled some amazing information about the fact that Buffett would have been wiped out if not for the Federal Reserve’s TARP program.
A good chunk of [Warren Buffet’s] 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.
What’s crazy is that so many people have been turning to Buffett for guidance on the most recent financial collapse and while he makes the rounds of Charlie Rose and whatnot he’s doing his best to profit from the US Government’s bailout of the companies that he’s invested in.
Then there’s the fact that many of the companies he invested in were significantly to blame for the global financial collapse.
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.
I was too naive in my impression of Buffett. That ends today.