'Grateful Nephew' Warren Buffett Thanks Uncle Sam For All The Money
Signing off as "your grateful nephew," Berkshire Hathaway chief executive Warren Buffett takes to the pages of The New York Times to do his part for TARP and country and thank "Uncle Sam" for all the bailouts that arrived in the nick of time as "all of corporate America's dominoes were lined up, ready to topple at lightning speed":
Nor was it just business that was in peril: 300 million Americans were in the domino line as well. 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. There was no hiding place. 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. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction. And when our citizens are losing trust by the hour in institutions they once revered, only you can restore calm.
When the crisis struck, I felt you would understand the role you had to play. 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. You would have to improvise solutions on the run, stretch legal boundaries and avoid slowdowns, like Congressional hearings and studies. You would also need to get turf-conscious departments to work together in mounting your counterattack. 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.
Buffett goes on to thank many people specifically for their efforts, chief among them Hank Paulson and Tim Geithner.
I get what's going on here, of course. Buffett is casting himself as just another member of the polis -- just a mere "unum" stepping out to offer thanks on behalf of the "pluribus." Buffett says, "I don't know precisely how you orchestrated these. But I did have a pretty good seat as events unfolded." Well, if you want to know what it looked like from Buffett's vantage, we can turn to the work of the late, great Bloomberg reporter, Mark Pittman:
Henry Paulson's bank bailouts, done under "great stress" during the worst financial crisis since the Great Depression, failed to win for U.S. taxpayers what Warren Buffett received for his shareholders by investing in Goldman Sachs Group Inc.
The Treasury secretary made 174 purchases of banks' preferred shares that include warrants to buy stock at a later date. While he invested $10 billion in Goldman Sachs in October, twice as much as Buffett did the month before, Paulson gained certificates worth one-fourth as much as the billionaire, according to data compiled by Bloomberg. The Goldman Sachs terms were repeated in most of the other bank bailouts.
"If Paulson was still an employee of Goldman Sachs and he'd done this deal, he would have been fired," (said Joseph Stiglitz, a Columbia University professor who won the Nobel Prize for Economics in 2001).
Buffett received 43.5 million Goldman Sachs warrants valued at $82.18 apiece on the date of the transaction, or $3.6 billion, Bloomberg analytics show. Paulson, who served as the New York-based bank's chief executive officer until 2006, injected twice as much taxpayer money into Goldman Sachs a month later and got 12.2 million warrants worth $72.33 each, or $882 million.
Naturally, it's hard to imagine that Paulson et al would have been able to win the same sort of deal for you and I that Buffett managed for himself -- not that Paulson ever entertained the idea of making such an attempt! But it does go to show that in Uncle Sam's America, some nephews are more equal than others.
Pretty Good for Government Work [New York Times]
Paulson Bank Bailout in 'Great Stress' Misses Terms Buffett Won [Bloomberg]