Questioning Warren Buffett's Role
I've spent most of the day traveling, and have had a bit of time to think, and one of the things I started pondering was how no one has bothered to ask about the propriety of Warren Buffett's role in this $700 billion orgy of disaster capitalism. Consider these facts:
- Buffett is one of the top economic advisers to Barack Obama, a senator whose influence over whether this bailout passes is, ahem, not small.
- Buffett took a sizable stake in Goldman Sachs today, investing $5 billion in the company. This came after Goldman reorganized itself in a way that will make it better able to capitalize on the bailout windfall.
- Sure enough, Bloomberg News reports that if this bailout passes, it will mean a potentially huge windfall for Goldman Sachs - ie. now for Buffett. Additionally, Obama has now said he doesn't want the bailout measure to include any bankruptcy reform measures that would end up forcing bailout recipients like Goldman Sachs to take on more losses.
Knowing all of these irrefutable facts, am I out of line to think Buffett's role -- and the Obama people allowing him to play this role -- could be perceived as a wee bit shady?
He's heavily investing in a company that stands to make a huge windfall if the bailout passes, and he's simultaneously advising the guy whose support is critical for passing the windfall. I'm not in any way saying Buffett already has insider information that Obama is going to support the bailout -- that seems like the insider trading-ish behavior Democrats say they want to stop.
But I am wondering why no one has even bothered to ask whether Buffett's dual role in all this is appropriate? Look, I'm sure Buffett is a great guy, and its terrific he's planning to donate a lot of his money to charity. But appearance-wise, this doesn't look good -- it seems, in fact, to reinforce the whole disaster capitalism image of this bailout. While there may be no overt improprieties here, while Buffett certainly may just be independently investing and then independently advising Obama, and while I know we are never ever supposed to question the awesomely unquestionable awesome Warren Buffett, the image that his dual role projects is not one that should inspire any confidence that this bailout is in the public's interest. I don't think I'm being a conspiracy theorist when I ask whether we should at least be asking about this (after all, something can't be a conspiracy if the facts are right out in the open).
How is it that no major journalist or news organization has asked simple questions about Buffett's role? And how is it that Obama's people aren't worried that McCain -- the quintessential opportunist -- is going to roll out the questions on their own, in the form of an attack ad? And how come progressives aren't asking those questions? Think of it this way -- if this was a McCain adviser doing the same thing, would we not question it?
I just want to state for the record that the reason I'm asking this question is not to bash Obama (and for those who think I am, please -- use the comments section to explain to me how anything in this post is factually inaccurate in a way that spins up some sort of dishonest "attack" on Obama). As I've said, this is really not about the candidates or the election. This bill is way more important than that right now. The reason I ask this question is because the whole situation has a nasty stench around it, and I'm really curious which actors are helping emit that stench.
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Buffet says rich people need to pay more taxes, so I would need some solid proof that he has a devious motive here.
http://abc
Maybe when he dies, he will "will" his huge estate to the American voters to pay off the increased debt this administration has created, which increases significantly with this so called bailout. This is just another example of wealth redistribution and class warfare, but this clearly is taking from the poor taxpayers to give to the rich. Who is the opposite of Robin Hood? Could it be our own congress, who are supposed to be of, by and for the people?
I don't know anything about it more than what you've just posted. I don't know whether there is a problem here or not, but there IS the APPEARANCE, and that may be enough, since it would be enough for me if it were McCain....
I will research this, thank you for bringing it to my attention!
Remember during the '04 campaign how Georgie went on and on about how fabulous it was that more Americans owned their own homes. Somehow making it sound like it was all his doing. Well, I am guessing that it was. It would be great to look at who and how these poor loans got started. My guess is that it was a major effort on the Bushies part to get him re-elected.
Can we find video of his bragging in '04?
See Bruce Tenenbaum's Profile
I think you're off base on this one.
As one of the most successful investors in history, Warren Buffett is one of the few men on Wall Street who doesn't need to take short cuts to make money. And while $5 billion dollars is not a drop in the bucket for anyone, it's an amount he can well afford to risk. What he does is assess risk and when he sees a bargain, he goes for it. Indeed, Goldman is the exact type of investment Buffett has become famous for making; a fine company that has been taken down by external market forces and not necessarily through any actions of its own.
Goldman is a solid company that will, in all likelihood, thrive again in the future. Buffett's investment has the benefit of helping to insure the company's future, which in turn increases the probability that the investment pays off for Buffett. And, in the meantime, Buffett gets paid 10% on his money.
Doesn't need shortcuts to make money?
Let's say Buffet had two deals on his desk and deal #1 requires $100 up front with a likely $40 payback in three years, and deal #2 requires $100 and pays back $60 in two years. Are you actually suggesting that deal two would be viewed as some sort of "short cut" and he wouldn't need that so he takes deal #1?
And your line
" What he does is assess risk and when he sees a bargain, he goes for it. Indeed, Goldman is the exact type of investment Buffett has become famous for making..."
On that score I completely agree. This is a bargain. A big big bargain. And in this bargain, it is we the people who are getting shorted. Our tax dollars could be used for health care, roads, education or to make this deal helping the sage Buffet gets his bargain.
Let's all go out and celebrate this billionaire and his bargain. America what a great country!
I don't think David Sirota is off base at all!!
The following quote is from Warren Buffet in the Wall Street Journal.
Adding to the pressure on lawmakers to do a deal, billionaire investor Warren Buffett said he wouldn't have considered investing in Goldman Sachs Groups Inc., a move he announced Tuesday night, if he didn't think the bailout would be approved. "I really do think Congress will do the right thing, when it's terribly important, and they will do it fast," he said. "They will haggle but they have the national interest at heart."
He seems to say that his decision to make the investment was based on the belief that the bailout proposal would be enacted by congress.
Check the quote out for yourself.
http://onl
I wonder what Warren Knows that we all don't know?
David Sirota is Right On!!!
This headline just in on the Huff Post Business page.
"Deal Coming Soon,Emanuel Says On MSNBC He Ran Deal Past Buffett"
Not only does Warren Buffet advise the Obama campaign, but Ron Emanuel runs the bailout proposal by Buffet before the upcoming vote.
Warren Buffet does not risk 5 Billion dollars unless it's a sure thing.
He knows the deal is going to go through because he's the advisor to many of the party's involved in it. In fact he's probably recommending changes. The system is Rigged in Buffet's favor.
If this isn't conflict of interest, then I don't know what is. This bailout is full of corruption.
This Bail out is for Wall Street investors, not everyday working people.
David -- I get what you see. However, we are electing a President, not a saint. Let's be clear. We need Senator Obama to get elected -- and this crisis is no time for him to begin grandstanding. The financial markets are the only one we have and we ALL have to work with it as it is -- for now. Nevertheless, next year we will be vigilant.
The bailout may only make things worse for the markets. Obama has already said he may have to "phase in" the social programs and investments that he has been promising during the whole campaign because of the hit the federal budget will take. Now we don't even try to include bankruptcy reforms in the deal?
From where for what and with what are you going to "be vigilant next year" after you've already been bamboozled into a plan that loses most of us everything, as progressives and as individuals.
This is even before this business with Buffet. It's not "'grandstanding" for Obama to ask him to step down, with no hard feelings, as economic adviser to avoid the appearance of impropriety. This is the least he can do, since Buffet clearly could already have gotten the insider information he needed and had the influence he should not have had. We are hardly in the realm of "saintly" behavior at this point--simply that of plausible deniability that he's not operating just those who are most guilty in bringing us to this crisis.
Bravo David,
I never thought I'd actually see some objectivity in the Huffington Post concerning Obama's candidacy.
Barak Obama plays the political game Chicago style. The grants secured while in the IL state senate came back to him in the form of a tripled salary for his wife and nice plot of land adjoining his home. Is this Warren Buffet deal really a surprise. I as a real liberal democrat I am dumb founded by the surrender of all objectivity, in the media, and amoung voters when it comes to their support of Barak Obama. Ralph Nader supported John Edwards, but when he dropped out he felt it necessary to run for president again. He knows that Obama is a friend of corporate interest if not he would support Obama. Please check out Ralphs letter to Senator Dodd and Congressman Frank July 23, 2008. Go to the Nader Archives and click on July 2008
www.nader.
The thought that voters would flock to Barak Obama instead of Ralph Nader, who has been demanding hearings by the democratic chairmen of the Senate committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services concerning the FDIC, is mind boggeling. Barak Obama is out for himself and not America.
Wake up Obamabotts!
As a non-Bot, I ask who does one wake up to in a field of Zombies -- Nader? -- McKinney?
Mr. Obama is not pulling the wool over my eyes I understand he is a politician and my support is not a case of hero worship, though I must admit his candidacy has been inspirational. I like the Obama candidacy most because it is making America contort itself as it deals with its own hypocrisy. The Rezco land deal and the alluded to Chicago style politics is how the game is played all across this nation. It is said the most important thing behind the education you get from college are the associations you make because those associations can be parlayed. Cronyism is endemic; Mr. Obama did not invent it and may have benefited from its use in his ascent to where he currently resides. I trust in the man however and I do not live in fear of letdown. He is a politician with skills. He is a man of accomplishment. He is just as ready to be president as any other is. If he wins, I think he will make a fine president. If he loses, I think he and his family are set for life and he will find other ways to serve. Is he a shyster? It has not been proven to me.
Most important of all, Warren has cash...and faith.
It is our job as Americans to embrace faith with investment once more. Warren and Berkshire aren't running away with our money. They ask all of us to have faith in our investments.
I trust Warren as a mover and shaker - not a profiteer. OK - some profit please....
David, this whole deal stinks. I said it earlier on other threads: this is just one more Big Party for Wall Street. It's the party to clean up after the previous orgies.
They just changed the look of the gameboard, but the basic moves are the same.
I'm disgusted with both parties and candidates. It's business as usual in New York and DC.
I agree you ought to try to get your message out to Obama, but it looks to me like the Little People are the unwilling suckers again. Heck, I don't even want to bother voting now. Where's the power in that?
Totally disgusted. They couldn't even throw some equity our way. Disgusting. Buffett should be ashamed of himself. This isn't the America of 1787.
Buffet simply buys when everyone else is selling. Plain and simple. He doesn't need to care what does or doesn't happen with the bailout because he is buying preferred which will cover him even if they go belly up. When things do turn around and they will, he will make out like a bandit. Goldman is simply loading up with as much money as they can find in order to survive, while have the ability to buy up others down here on the bottom, with new cash rich partners. It is the common the average investor holds and there is a much different story.
Buffett is a man known for his word. He does not invest in things he doe not understand.
Goldman Sachs at a mere $130 per share today looks like deal. It was a very smart move.
To most of us, $130 is what we spend in gas and lunches during one week.
While "Main St." (Us) are forced to choose between expenses and potentially useless investments.
Warren may have friends, in fact he does.
Absolutely. Paulson, who was CEO of Goldman Sachs and now wants to clean up the mess he made, should be locked in a cell with Buffett.
You guys take all the fun out of it.
Buffett's just using his carefully and intelligently grown (`self-made') wealth to take advantage of the current situation. You don't get much more conservative than that. Look over Buffett's record: I challenge you to prove he's not a `man of honor'. In terms of conflict of interest and Goldman Sachs, I think Paulson's assets and options are rather more in play for investigation.
You are right on target with your analysis and questions. This financial crisis should not be a Republican vs. Democrat scramble to assign blame. Both political parties are to blame. This is more of a regional and class issue. The investor class of both parties, concentrated in New York, New Jersey, D.C., Conn., Mass., L.A., Chicago needs to have a lesson in risk management. The world will not end if these greedy clowns experience the downside of capitalism in a close and personal way. Let it happen, Captain!
enochsmoky,
I am having a fine time watching conservatives try to argue against their own doctrine. Things are so bad that welfare is acceptable; this is the conservative mantra? That is hypocrisy of the sidesplitting sort. I say let them smell the funk of the dirty and sweaty sock of capitalistic greed as well, and may it suffocate their fortunes and their egos. If the people who lost their homes must pay then the people who participated in their ritualistic ruin should suffer as well. If not, then give the people new fixed rate loans for all mortgages currently or slated to be in distress and the people who already lost their homes give them some assistance as well. Otherwise, may we all strap in tight and get ready for the plunge -- Going down -- next stop the basement of democracy and economic well-being.
GrainOSand,
I am a conservative and that is the main reason that I want this crisis to take its natural course. The Republicans will probably be blamed for this debacle, however, Democratic involvement in Fannie Mae and Freddie Mac is striking. The whole idea of the government aiding and abetting the issuance of mortgages to people who can't afford it goes to the core of Democratic philosophy. And then, Chuck Schumer, Chris Dodd , Barney Frank and others stonewall Republican attempts to reign Fannie and Freddie in and now Democrats have the audacity to hang this piece of crap around the necks of Republicans. The only consolation is that, unknown to the general public, a big percentage of these investment bankers are Democrats and this crisis will hit hardest in all of those true blue liberal bastions.
I wrote about this earlier and as I did, I was almost ashamed for thinking it. However, my Spidey senses were tingling and I am thinking that tomorrow's scandals are being seeded now, some through the stealthy and conscious manipulation of political operatives and some unwittingly by campaign staffs and yes, even by candidates. If Mr. Obama hopes to be an effective president, he needs to stay clear of even the hint of impropriety. I do not know if the campaign reads the posting here Mr. Sirota but I suggest you get your message to them somehow before a vote takes place. There is a real setup feel about all of this and there is much more going on than can be seen from the masses point of view. An attempt is being made to play the masses and Buffet is not immune to being shady, though I have never read or heard that he has such a tendency. We know the GOP is shady and I think they are heavily involved in any political calculation surrounding this smoke and mirrors act we are witnessing as billions of dollars go to hands unseen, unknown, and probably unworthy. Caution is deemed prudent.
paulson today blamed "future administrations" for letting this happen.
How do you know if someone who calls you friend to your face calls you something far less flattering behind your back?
I worry about Obama on this question as many cozy up to him and try to tie their fortunes to his. He knows he cannot lead a movement of change if he is not elected so there is a necessary amount of calculation and compromise in his effort (that is the part I hate).
Buffett may have embraced you Mr. Obama but he may see you as another pawn to play to serve his own interest. I cannot be certain because I do not know the man but it seems to me if he really cared about you he would not make moves to compromise your position or to give an impression of impropriety. The air around a presidential candidate is rarified I am sure; I hope Mr. Obama keep his wits about him and watches those who smile in his face.
Mr. Obama needs to keep in mind the words of the Undisputed Truth:
http://www
He should also consider what the Ojays said:
http://www
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