I have always thought the relationship of Barack Obama and Warren Buffett was more like the odd couple than anything genuine and serious. How wrong I was. As time moved on we have discovered, from reading Throw Them All Out by Peter Schweizer, that hitching a ride on the Obama express was very serious, and very corrupt.
As more and more has been exposed concerning “Crony Capitalism” and the bailouts of banks and financial institutions we begin to know the “inside” players of “legal” insider trading from outside to the inside surrounding the halls of the US Congress. It’s a sad and corrupt tale of the political forces and so-called financial geniuses who’ve gotten rich and richer over the years.
This is not me complaining about the wealthy, its certainly not class warfare on my part, but the cheating at the taxpayers expense and political decisions, not on promised job creation or saving the nation, merely when the political elite tell us things must be done for the sake of the country we really better start paying attention.
Early on in the 2008 financial crisis, candidate and Senator Barack Obama had been cautious and lukewarm about a possible bailout. But in the days that followed Buffett’s multibillion-dollar play for Goldman Sachs, and with a mounting fear of economic collapse, Obama became a powerful champion of the government rescue. As a top Democrat in the country, he had an important vote. The New York Times reported that Senator Obama had “intensified” his efforts to “rally support for the $700 billion financial bailout package” after September 28, 2008. The plan was necessary said Obama, “to safeguard the economy.”
Publicly, Buffett struck a posture of political disinterest.
“I’m not brave enough to try to influence the Congress,” he told the New York Times.
But his actions directly contradicted his words. Days later, Buffett held a conference with House Speaker Nancy Pelosi and House Democrats during which he pushed them to pass the bill.
We faced “the biggest financial meltdown in American history,” he warned wavering Democrats.
The stakes were high for Buffett personally. If the bailout went through, it would be a windfall for Goldman. If it failed, it would be disastrous for Berkshire Hathaway. Buffett had large investment stakes in Wells Fargo and US Bancorp, banks that were suffering in the crisis.
The first vote failed, as Washington faced enormous heat from voters angry about the prospect of bailing out Wall Street. On the eve of the second TARP vote in the House, Buffett moved toward the fire again when he bought a $3 billion stake in corporate giant General Electric. Again, as with Goldman, he was able to negotiate advantageous terms, receiving a 10% dividend on his shares. He could also buy $3 billion in stock at discounted terms if he wanted. GE was in even worse shape than Goldman, thanks to its financial arm, GE Capital. Eventually it would need $140 billion in taxpayer capital to stay afloat.
Buffett is a genius at public relations. He said he had “confidence in Congress to do the right thing.” He appeared to be a savior of Goldman Sachs and GE. He gave members of Congress more reason to join by supporting such firms.
Robert Wilmers, the chairman and CEO of M&T Bank, said at the time:
“The pattern is clear, the bailout money and the perks are concentrated among the big banks, the ones who pay the lobbyists and make the campaign contributions, while the healthy banks pay the freight.”
Buffett needed the TARP bailout more than most. In all, Berkshire Hathaway firms received $95 billion in bailout cash from the Troubled Asset Relief Program. Berkshire held stock in Wells Fargo, Bank of America, American Express, and Goldman Sachs, which received not only TARP money but also $130 billion in FDIC backing for their debt. All told, TARP-assisted companies constituted a whopping 30% of his entire publicly disclosed stock portfolio. As one investigation by the House Chronicle put it, Buffett was “one of the top beneficiaries of the banking bailout.
Had the bailout not gone through, and had Goldman not been given such generous terms under TARP, things would have been very different for Buffett. As it stood, the arrangement with Goldman earned Berkshire about $500 million a year in dividends.
“We love the investment!” he exclaimed later to Berkshire investors.
His stake in General Electric was also profitable. As Rolfe Winkler of Reuters bluntly put it:
“Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.”
By April 2009, share prices for Goldman had more than doubled. By July 2009, it was reported that Buffett had already yielded a return of $2.5 billion for his investment.
After the bailout passed, Warren Buffett sat down and wrote Treasury Secretary Henry Paulson a four-page private letter proposing a larger solution to the financial crisis that would clean up the toxic assets that were plaguing so many financial institutions. He proposed that for every $10 billion put up by the private sector, the federal government would kick in $40 billion. As Paulson put it in his memoir:
“I knew, of course, that as an investor in financial institutions, including Wells Fargo, and Goldman Sachs, Warren had a vested interest in the idea.”
In the fall of 2010, Buffett wrote:
“Thank You, Uncle Sam,” in an op-ed in the New York Times in which he praised the role that government played in stabilizing the markets throughout the crisis. There was no disclaimer or disclosure of how he personally benefited from TARP or the Public-Private Investment Program. At the bottom of the article he was identified in a short biography:
“Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.”
With tongue sarcastically in cheek, journalist Ira Stoll, the former managing editor of the New York Sun, suggested the bio might have been more accurate with a bit of rewriting: (Emphasis LCs)
“Warren Buffett, the largest crony capitalist in the world, shareholder of GE, Goldman Sachs, Wells Fargo, US Bankcorp, M&T Bank, and American Express, as well as competitor of private equity and hedge fund firms that have been threatened with new taxes and regulations, and behind the scenes, insider adviser to most of the government officials mentioned above.”
Warren Buffet, the so-called genius investor playing the the “legal” insider trading, lobbying to save his own skin and telling Congress to raise taxes on the wealthy and super-rich while he places the bulk of his money in private foundations to skirt the payment of his fair share of tax payments. Imagine that!
Warren Buffet or “Warren’s Buffet” dining at the public trough on our dime!
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