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Warren Buffett is one of Goldman Sach’s largest stockholders, and since Goldman stocks have taken a pounding in recent days, it’s no surprise Buffett would try to defend the firm in which he has so much invested. But what are we to make of this?
From the New York Times Dealbook coverage of Buffett answering questions at Berkshire Hathaway’s annual shareholder meeting:
A bit more surprising is how strongly Berkshire’s head, Warren E. Buffett, is defending the firm. (He told Bloomberg Television before the meeting that he backs Goldman’s chief executive, Lloyd C. Blankfein, “100 percent.”
Mr. Buffett said that he feels little sympathy for the firms the S.E.C. says were hurt by Goldman’s purported lack of adequate disclosure. Of one firm, ABN Amro, Mr. Buffett said: “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”
So what is Buffett saying? Sounds like Buffett thinks any bank/investor who invested in a Goldman-created synthetic CDO fabricated by Goldman’s fabulous market makers was making a "dumb credit bet."
I’m sure all of the investors doing business with Goldman will be thrilled to hear this assessment. And so will Goldman’s attorneys and public relations folks trying to fend off the emerging impression that Goldman was running a massive fraudulent enterprise to bilk its naive customers.
Nice to know.
NYT: Goldman Shares Plunge on Inquiries and Downgrades
NYT: Buffett offers firm support of Goldman at meeting
28 Comments
And so much for the “Sage of Omaha”
I think this is called lighting a praire fire, but I could be naive.
Buck Fuffett. He should retire already.
Buffett has tons of swaps on his own books, and was trying to get amendments to pending legislation to protect his wallet. I’m good for it he said, just like AIG.
He’s just protecting his own investments. Too bad this mess is so toxic and GS was playing all sides such that there is no defense that doesn’t diss another party!!!! And serve to drive any sane, not-already-in-the-tank investor away from GS. And perhaps away from Buffett too, unless being dissed by Buffett is some kind of status thing.
Blankfein is such an incredibly creepy character it’s got to be a new low in MOTU standards. I can hardly bear to watch him talk and I find he makes no sense. He comes off to me as nothing better than a crooked used car salesman and worse. I cannot possibly be the first to say this.
Warren has an insurance company Scarecrow any bets if Goldman folds somehow Warren would have to pay?
This is starting to smell bad, real bad Warren I bet will try to protect his assets maybe with another government bailout.
A run on Berkshire would panic every talking head on all the business channels. The psychological impact cannot be overstated.
http://www.businessweek.com/news/2010-05-02/buffett-says-derivatives-law-may-spare-berkshire-on-collateral.html
My bold What is a fair amount of collateral in a world where Greece is being bailed out, Dubai, Italy, Iceland, Ireland could all default, The airline industry wants a bailout and a volcano could close the airline business in Europe again?
An oil spill could take out how many fishing and tourism jobs and the homeloans of the people who worked for those industries.
Also does even Warren have 5%, 10% of 63 billion dollars?
Though I agree with Buffett’s sentiment, I’ve got to question if Buffett was pulling strings behind the scenes. I say that because not only does Buffett own a large chunk of GS but he also owns a portion of Moody’s too. Though I don’t know if Buffett would have done something actually illegally, I think it would be really bad if it came out that Buffett had attempted to influence the rating agencies to benefit GS.
I doubt Moody’s needed much interference to affect their ratings. They know who pays their salaries.
I just watched This Week, in which Katrina, Sharpton, and Maher ganged up on George Will. It was like a war.
They may not have needed it, but they certainly got it.
Warren’s clearly “talking his own book” here. But it will be interesting to see how much the stock market bounces Monday with these remarks as encouragement.
Hard to trust anyone who’s goal in life is sitting in his counting house so as it is, but that derivatives exemption that Ben Nelson tried to insert into finreg made me never trust Buffett again – and now this.
Hope someone posts a clip. That might have been worth seeing. Will is such a pompous ass.
Buffett is simply covering his own ass. With any luck Buffett will look like the ”dumb” one for investing $5 billion in Goldman Sachs.
There was a massive water main break leading from the main source of fresh water into the Boston area, so surrounding communities, including my town, have been told not to drink the water without boiling it first.
Meanwhile, masaccio reports massive flooding in his home town — another state.
There’s clearly a conspiracy to punish FDL contributors, because I’m sure I’ve don’t nothing to upset Mother Nature.
Time to take out the plastic for tomorrow’s pickup.
OK, it’s easy to bitch and complain, but what to do about it?
In professional markets the customer is buying expertise, so the customer can’t be right, and has to be protected. Real Estate brokers, lawyers, clergy all understand this. But the “fiduciary” duties in accounting and investing are not nearly as clear.
Simply put, these guys need to get professional or go away. Professionals are bound by a whole realm of law, ethics and code. A single agent can’t handle both sides of a deal due to conflicts of interest. This is a critique that can be squarely laid at GS’s feet, and the investment class more generally.
By limiting conflicts of interest, by placing fiduciary limits on these markets we will get sensible restraints without heavy regulation.
Regulation is easy to call for but hard to manage. Regulators get captured, or bought off. They are staring at a gray map and can lose sight of the clear bright lines. Fiduciary laws are old, known and clear. If an agent misleads or offers bad advice they can be sued for due diligence. If on the other hand, we were regulating these markets, you couldn’t sue, they get indemnified by regulation.
The professional market was perhaps best described by Ben Franklin who wrote, “a country boy between two lawyers is like a fish between two cats.” This is inherent in any market where we go for expert advice. The customer can’t “be right” we don’t know enough. Because of that customers are protected. The financiers need to grow up and join the big boys in the professional markets, otherwise they should be broken up like any back alley craps game or three card monty scam.
“It’s hard for me to get terribly sympathetic” for someone like Warren Buffet when he apparently can muster no sympathy for the likes of ABN Amro, or anyone but himself.
Well, I’m not willing to throw Buffett under the bus yet, especially not for just essentially defending a friend until proven guilty. But I also think that anyone who doesn’t think Moody’s ratings are affected by who pays the bill is just hopelessly naive, and to that point, as long as Congress leaves the people who make up the tranches, etc. to pay for ratings, of course it opens up questions regarding how the system itself is corrupted. It was created corrupt.
However, I will say I watched some of Blankfein’s incredulous responses to several of the Senators’ questions, and all I could do was stare with my mouth hanging open. How does a CEO expect to maintain any credibility when he promulgates that he didn’t know how much the AAA ratings meant to the value of the product, didn’t quite get the relationship between ratings and stock sales. Huh?!! Did I just hear him say that? I did, didn’t I?
But here’s the part that’s really hard for me. As a soon-to-be retired realtor, I’ve had to take continuing education courses every two years since 1989. So every two years we get horror stories of the repercussions of ignoring your fiduciary responsibility to your clients due to the agency relationship you have been nurturing. So what do these brokers actually think: that they have no fiduciary responsibility to clients that come to them for professional advise? That it’s okay to have the broker turn around and bet against his client as soon as they turn their back? At the very least, what appears to have become so ingrained in the Wall Street culture is an attitude that lacks any consideration of ethical concerns. These people are amoral!
The problem is not only that regulations and rules of the road were taken away along with deregulation, including the repeal of Glass Steagall. The ethics involved in the agency relationship, the fiduciary aspects of the agency relationship between a broker and his client, that stuff hasn’t changed. It’s just been deep-sixed for so long, being replaced with more of a law of the jungle mentality. I can’t believe that ethical aspects of the broker/client agency relationship is any different for financial brokers than it is for real estate brokerage, so I have to believe that we need to revamp what business and customers, and any entity falling in between, have a right to expect from one another. Until then, we just have a very broken system.
For the same reason having bought Goldman’s stock might have been a dumb move for a guy with the wherewithal to know exactly how they do business and what it’s risks were. But, yes, I suspect a lot of players jumped into bed with GS – a partner known for high-risk play – without wearing a hat because they thought it would be such fun and that they would get to fleece everyone else in town.
Investors were depending on the validity and neutrality of investment ratings, which in the past used to be a pretty good measure of objective consideration.
In the last decade or two, the ratings became hopelessly corrupt, but this fact was concealed from investors. Hell, a fund based entirely on toejam and bellybutton lint futures could’ve snagged a AAA rating.
William Claude Dukenfield and his future clone, Buffet, have always understood the rule: Never Give a Sucker an Even Break. All of the defenses, made by the clearly compromised Buffet along with so many others, are based upon the idea that their version of capitalism is not about producing goods in exchange for capital. Rather that the profit of rent requires finding the dumbest guy in the room and taking everything you can before the other sharks scent the blood. The rentiers that Adam Smith despised as parasites on production now spend all of their time either setting up the next chump or explaining why they need to rely upon the ultimate chump, the American taxpayer, to make sure their profits are safe after they make a bad bet. Indeed the entire vocabulary of people like Buffet is about winning and losing bets. Producing things is for suckers.
I agree with every word you said, but would just make clear that I was not throwing Buffet under any bus, I think he’s one of the more decent businessmen around, but he made a $5 billion investment in Goldman Sachs, so when I say he’s “talking his book,” that’s just financial industry slang for when someone speaks in the interest of the investment he’s already made. OK for him to argue in favor of his own financial interest, but I think we should recognize that that is what he was doing with these comments.
A sign behind the bar down in Tbogg’s neighborhood reads:
“We screw the other guy and pass the savings on to you.”
So Goldman wasn’t making a dumb credit bet when they bought all those CDSs from AIG?
If I were Buffet and had a 5 billion stake in GS I might muster something positive to say considering the fact that just a short time ago I was out in financial land telling anyone who would listen that these derivatives were weapons of financial mass destruction. I also wonder if it was one of Buffet’s insurance companies that held the 2 billion dollar policy that Blankfein told Senator Levin was paid with regard to AIG’s failure. Just who at the US Treasury had the authority to tell Blankfein “no problem” we’ll let the US tax payer pick this one up rather than a 2 billion dollar hit to your insurance company.Is it any wonder the DOJ doesn’t want the e-mails between GS, the Treasury and AIG released? Spitzer was right all along. Just follow the paper trail.
Buffet is another fallen angel who has betrayed his position of wealth and cultural influence to do business with corrupt political and business interests. How in the world do so many of our leader class behave like corrupt pigs who having so much want so much more- people be damned.