The whole financial system and everybody that depends on it was a beneficiary of the bailouts. If everything collapsed, everybody would have suffered. Buffett just happens to own a bigger slice of the market than almost anyone, so of course he benefited significantly. But singling him out, especially since he's stayed away from wall street's games and made extraordinary efforts to keep things above board for decades, is totally unfair.
"The whole financial system and everybody that depends on it was a beneficiary of the bailouts. If everything collapsed, everybody would have suffered."
A narrative convenient for powerful banks that was created by powerful banks and allied politicians. People have suffered and continue to suffer because of the crimes these institutions have committed. Propping up their corpses only helps the criminals who created the situation. Clearing out bad businesses so that new ones can take their place is a central pillar of capitalism. If you really believe a bunch of billionaires who claim the world's going to end if they lose their billions, well, you're gullible at best. Far from forestalling suffering, the continued operation of these entities and their influence on legislation perpetuates it. Their collapse is the best thing we could hope for, even if it causes short term turbulence.
That all sounds very good, but I'm sorry to say that without a banking system, everything in our society stops working, and the small guy would get hurt a lot more than billionaires.
Without a banking system? The idea is to have a banking system that works and follows the law and doesn't require trillions in handouts to stay solvent, not no banking system.
The entire US financial system is based on credit and liquidity. Clearly something had to be done. Do I agree that the bailout was the best way to do that? No. But a timely bad plan was better than an untimely good one.
By the way, the argument that nothing needed to be done is opposed to practically every economics departments' opinion in the country. Maybe you know more about economics than we all guessed, but I think it's time you show a PhD instead of arm-chairing here.
The something that clearly needed to be done was to make the perpetrators pay for the damages of their crimes, not the victims. If the US financial system collapsed, there would be a deflationary shock and the short term high unemployment associated with an economic realignment, but the country would be much healthier financially in the long term. Instead the crisis is simply being dragged out, with the inevitable day of reckoning certain to be much worse because of it.
The amount of money the US has pumped into its corrupt financial system is enough to put its entire population on welfare for years. A sane approach would have been to let the banks fail, let the markets tank, and ease the transition as needed with bottom-up debt relief and aid.
You should do your research before making statements like "especially since he's stayed away from wall street's games and made extraordinary efforts to keep things above board for decades."
Buffett didn't sit idly by while his holdings were threatened. He lobbied for, and supported, bailouts.
Not content with bailouts of companies he owned large stakes in, he made sweetheart deals to invest in Goldman Sachs and GE knowing what was going to happen. Have you ever explored those?
If his GS and GE investments aren't convincing enough, here are a few choice examples of the Oracle of Omaha's hypocrisy:
2. Buffett once famously warned that derivatives were deadly, but when it came time to put his money where his mouth was, he lobbied against proposed derivatives regulations that would have cost Berkshire billions (see http://www.independent.co.uk/news/business/news/buffett-lobb...).
Bottom line: whatever one may have once thought about Warren Buffett, his actions over the past several years make it clear he is no investor, he is a corporatist. And quite a successful one at that.
I've done my research about Buffet. I've read 2 biographies, a compilation of his annual letters, some of his early partnership letters, and most of his op-eds and TV interviews. The people who criticize Buffett usually don't know much about him and it shows in how they paint him in the stereotypical tycoon brush.
I sincerely believe that he was in favor of the bailouts because he thought that it was the least bad option at the time. Without more liquidity in the system, things could have turned out much worse than they did.
Sweetheart deals in GS and GE? Buffett had lots of cash and they needed it, so he made deals that were very profitable to BErkshire and they took it because they didn't have a choice. I'm sure he expected the government to step in because it was obvious to him that they didn't have a choice, but I don't think he had inside information.
Buffett has explained his derivative investments in recent annual letters, and his explanation made perfect sense. I'm sure you can find it, it was probably in the 2009 one ±1 year.
Both Buffett and Munger have been very critical of rating agencies and accountants, but I'm sure they've also defended both against criticism that they think is unfair. It's not because you're wrong that you're wrong in all ways, always in bad faith, and about everything.
I only had time to skim the first article (getting late here), but I agree with Buffett's reasoning on the TARP issue. If the banks DID pay back their debt, then why should they be the ones taxed? He's not saying that industries shouldn't be taxed to cover losses, he's saying that the government should go after specific industries (like the auto industry) that aren't performing as well as they should be. Chase, if I remember correctly, was very good about repaying their loans on time. Now why should they be punished for that?
Oh, and Warren Buffett plans on donating the vast majority of his wealth away upon his death, so I usually give him the benefit of the doubt and believe that his suggestions are intended to improve the economy as a whole rather than build up wealth. What's it matter to him if he makes or loses another billion when he's giving it away in the end? Nah, I think he's a good guy.
Yet he is the only one who amongst the super rich in America who is talking about raising taxes. He is doing this specifically because of the positive impact it would have on finances for the country, despite the fact that this would have a disproportionate/fair share effect on his tax payments.
None of the positions you linked are inherently contradictory. Especially in the derivatives trading I have the feeling you have no idea what you're talking about. Going back and requiring existing derivatives contracts could cost a huge amount of money and time that wasn't taken into account when they were first bought. Applying the regulation to future contracts is a perfectly reasonable suggestion (especially since the vast majority of derivatives contracts are short term).
btw, When Berkshire acquired Gen Re (a massive reissurer), they closed down its derivatives book. It cost Berkshire hundreds of millions and took years, but they closed that book because they couldn't understand these derivatives.
The ones that Buffet has invested in are way more straightforward, don't pose any systemic risk, and have very different collateral requirements than the toxic stuff.
Prehaps they all benefited, but it seems as if the bailouts benefited the most irresponsible people far more than the rest of society.
The banks should have been allowed to fail. The only reason capitalism works is by providing a huge incentive to do things right. Bailouts like these will convince companies they can get away with the same thing in the future.
People talk as if shareholders in companies like AIG and Citi escape scot free. Citi is down 93% and AIG is down 98%.
The point was that you didn't have a domino effect that took down the whole world economy (no industry that is bigger than a corner store can function without a banking system). Throwing out the baby with the bathwater just so you can punish some people is counterproductive.
Given how much of everything moves based on short-term credit, it is unlikely anybody would have been able to step in before the economy imploded. The credit crunch was not about being able to get funds to build a new building, it was about being able to get funds to ensure the shipment of raw parts was sent (taken recursively through the entire supply chain all the way to your local retail outlet).
If that had seized, it would have been far worse than the bailouts.
Unfortunately, there should have been at least civil penalties (and probably criminal pentalies) associated with building and hiding enough toxic assets to tank the banking system. The real travesty was not the bailout, it was that there were no negative consequences (relatively speaking) to the people who caused it (which is a tough question to answer, but not enough effort was made, IMO).
I don't think you understand how everything is plugged into the credit markets and banking systems. I suggest you read Sorkin's book a as starting point.
