Realty.com

Warren Buffett Defending Bankers

Posted May 17, 2010 by Matthew Denton

And never mind the pathetic homeowners!

There’s something about Warren Buffett that I’m starting not to like about these days. Apparently, the Miracle of Omaha should be keeping his thoughts to himself after reports have come out detailing how he defends Goldman Sachs from the charges that were slapped by the Securities and Exchange Commission to the bank. Buffett thinks the S.E.C. has not made a “dumb move” unlike ABN Amro. He feels terribly sorry for Goldman. He backs CEO Lloyd Blankfein. He

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 backed Goldman’s chief executive, Lloyd C. Blankfein, “100 percent.”

Mr. Buffett said that he felt little sympathy for the firms the S.E.C. says were hurt by what the agency calls Goldman’s 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.”
What Mr. Buffett thinks about Goldman is something the investment community has been buzzing over for days. Berkshire has invested $5 billion in Goldman preferred shares, and Mr. Buffett is notoriously skeptical of Wall Street mores. One of the low points of Mr. Buffett’s investing career is stepping in at Salomon Brothers when the firm was embroiled in a trading scandal: he had to temporarily assume Salomon’s chairmanship and apologize to Congress.
Mr. Buffett added an implicit rebuke of a line of questioning raised by several senators during this week’s Goldman hearings. An investment bank could very well be short the securities Berkshire is buying, and a buyer like Berkshire should be perfectly aware of that in any case.
That isn’t to say that Mr. Buffett and Mr. Munger think Goldman is blameless here. Mr. Munger suggested that there was a difference between breaking the law and behaving unethically — and that simply following the law shouldn’t be the basis of a business’s conduct.

A Crowd With Pity for Goldman
Inside the halls of the Beverly Hilton, Mr. Milken, the onetime “junk bond king” of Drexel Burnham Lambert who fell from grace and has resurrected himself as a successful philanthropist, has turned his former Predator’s Ball into a thought-provoking three-day event about the economy, politics, health care and energy.

Inside the halls of the Beverly Hilton, Mr. Milken, the onetime “junk bond king” of Drexel Burnham Lambert who fell from grace and has resurrected himself as a successful philanthropist, has turned his former Predator’s Ball into a thought-provoking three-day event about the economy, politics, health care and energy.

“I don’t want to use the word childish ... but it’s childish.” That’s how Kenneth Griffin, the founder of the Citadel Investment Group, described the Securities and Exchange Commission’s decision to pursue a civil fraud case against Goldman for the firm’s role in creating a subprime mortgage-related investment that turned sour, costing some investors more than $1 billion in losses. Mr. Griffin was standing in the corner of a ballroom at Mr. Milken’s conference Monday saying that the Goldman case was politically motivated.

The government is going for the jugular,” Meredith Whitney, a Wall Street research analyst who spotted the subprime bubble early, said between panels. “Sadly,” she said of Goldman’s reputation, “the damage is already done.” She added that, while Goldman is now being singled out, “everyone was in the same soup.”

The prevailing view among the attendees is that Goldman got too big, too fast — and too arrogant. Goldman’s transformation from one of the oldest, most respected names where clients came first to an aggressive trading firm whose mission wasn’t to avoid conflicts of interest, but to “manage” them, has become the poster boy for what went wrong on Wall Street.
http://www.nytimes.com/2010/04/27/business/27sorkin.html?ref=business

http://www.nytimes.com/2010/05/02/business/02buffett.html?scp=2&sq=buffett%20defends%20goldman&st=Search

His support for Goldman came in a question-and-answer session at the annual meeting in Omaha of Berkshire Hathaway, the giant insurance and investment firm Mr. Buffett runs. Berkshire owns $5 billion of preferred stock in Goldman.

Goldman denies any wrongdoing. Yet the firm has been battered by the S.E.C.’s charges, having lost about $21 billion in market value in the two weeks since the regulator filed its suit.

He drew upon some of the same points that Goldman has used in its own defense, including the sophistication of the investors the S.E.C. says were defrauded by Goldman’s lack of adequate disclosure in the deal. He said those investors should have conducted better due diligence. Of one investor, he said, “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”

He also stood behind Mr. Blankfein. When asked whom he would select if Goldman needed to find a new leader, Mr. Buffett replied, “If Lloyd had a twin brother, I would vote for him.”
Mr. Buffett has a significant investment in Goldman. In 2008, during the depths of the financial crisis, Berkshire invested $5 billion in preferred shares. Those shares carry a 10 percent interest rate, meaning that Berkshire is earning about $500 million a year from its holdings. (Or as Mr. Buffett put it, $15 a second.)
Though Mr. Buffett said the S.E.C. lawsuit had not yet negatively influenced his opinion of Goldman, he said he would revise his thinking if new evidence came to light.
Mr. Buffett added that Goldman is a longtime adviser that “helped build Berkshire Hathaway” by selling them businesses for more than 50 years.

term

Realty.com is a real estate search portal, dedicated to connecting home buyers and sellers to trusting real estate services. Follow the Realty.com blog for up to date housing news and trends. And monitor local mortgage rates at RealtyGadget.com.