[Marxism] Key Obama backer worth $50 billion profits from taxpayer bailout of Wall Street

[Duane Roberts <duaneroberts92804@xxxxxxxxx>]

It looks like Warren Buffet's efforts at flying around the country co-hosting 
one multi-million dollar fundraiser for Obama after the other at mansions owned 
by his billionaire buddies have finally begun to pay off big time, haven't 
they? 

Indeed, to paraphrase an old quote, a rising tide of taxpayer money lifts all 
yachts! :)

Sincerely,

Duane J. Roberts
duanerobetrs92804@xxxxxxxxx




http://www.sacbee.com/341/story/1756261.html

Billionaire Buffett benefits from bailout he promoted

By Charles Piller 
cpiller@xxxxxxxxxx

The Sacramento Bee

Published: Sunday, Apr. 5, 2009 - 12:00 am | Page 1A 
Last Modified: Sunday, Apr. 5, 2009 - 12:25 pm

Financier Warren Buffett has been lauded for his plain-spoken denunciation of 
the greed and foolishness behind the economic crisis. He has pushed the massive 
federal bailout of imploding banks as the essential response to an "economic 
Pearl Harbor."

When Buffett speaks, people in high places listen. The famous investor is so 
highly regarded that in a debate last fall, both presidential candidates said 
they were considering him for treasury secretary.

A Bee examination of regulatory records shows that Buffett, the world's 
second-wealthiest person, also quietly has become a top beneficiary of the 
banking bailout he so vigorously advocated.

Just 28 companies received more than 90 percent of the funds so far disbursed 
to financial firms by the $700 billion Troubled Asset Relief Program, or TARP.

Buffett's holding company, Berkshire Hathaway Inc., did not directly receive 
any of that aid. But Berkshire is the largest shareholder of San 
Francisco-based Wells Fargo & Co., which got $25 billion â 91 percent of TARP 
funds invested in institutions headquartered in California.

Overall, Berkshire owns more than $13 billion of stock in the top recipients of 
TARP funds â including Goldman Sachs Group Inc., US Bancorp, American Express 
Co. and Bank of America Corp., all considered by analysts to be in deep trouble 
before the federal infusion. The more the bailout props up these financial 
companies, the more secure Berkshire's investments.

That total, The Bee found, ranks Berkshire fifth among all investors in 
TARP-assisted companies. Berkshire's TARP holdings constitute 30 percent of its 
publicly disclosed stock portfolio. That proportion reflects at least twice as 
much dependence on bailed-out banks as any other large investor.

Buffett increased his bank holdings in September, while openly pressing 
Congress to pass the bailout.

"If I didn't think the government was going to act, I would not be doing 
anything this week," Buffett told CNBC, after investing $5 billion in Goldman 
Sachs. "I am, to some extent, betting on the fact that the government will do 
the rational thing here and act promptly."

In October, TARP was approved. Still, Buffett's credibility is such that 
experts tend to withhold judgment about his motives.

"People can draw their own conclusions" about Buffett's huge stake in the 
bailout, said Richard Coppes, an expert in business ethics at the international 
law firm Jones Day, and former general counsel of the California Public 
Employees' Retirement System. "But it shows one reason Buffett is so intensely 
interested in TARP."

Buffett, whose company also is the largest investor in Goldman Sachs and 
American Express, declined to be interviewed. In a February letter to Berkshire 
shareholders, he said that without government intervention, the consequences 
would have been "cataclysmic."

"Like it or not," he wrote, "the inhabitants of Wall Street, Main Street and 
the various Side Streets of America were all in the same boat."

Experts agreed with Buffett that preserving a functional banking system, TARP's 
stated goal, benefits everyone. In dispute is whether the bailout was the 
fairest and best approach.

Some say large shareholders such as Buffett actually have been the primary, and 
perhaps only significant, beneficiaries of TARP. Bank stocks have recovered 
significantly in recent weeks â Goldman's share price has more than doubled 
since November â and no TARP bank has failed.

Berkshire Hathaway shares are down nearly 40 percent since September, but have 
risen sharply in recent weeks with the financial sector stock rally.

Critics of TARP, however, worry that it propped up Wall Street against 
bankruptcy at the expense of Main Street and Side Street taxpayers. The 
Treasury Department expected TARP to get loans flowing again, but the market 
has barely thawed and unemployment has surged.

Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, 
recently advocated a government takeover of moribund banks until their balance 
sheets can be cleaned up.

"Shareholders would be forced to bear the full risk of the positions they have 
taken," Hoenig said, "and suffer the resulting losses."

TARP's quiet winners

Buffett's TARP assets appear to have traveled under the radar of federal 
oversight groups. The holdings of foreign firms that gained much from the U.S. 
bailout also have escaped public notice.

The Bee's examination of federal data showed that foreign investment firms hold 
more than $31 billion in TARP-assisted financial companies. That lends credence 
to U.S. concerns that some European countries should more forcefully stimulate 
their own economies.

The Europeans agreed to loans and trade guarantees at the G-20 economic summit 
last week in London, but not the stimulus package sought by President Barack 
Obama.

"It shouldn't just be the obligation of the U.S. to bail out the global 
system," said Richard C. Ferlauto, governance and pension director for the 
American Federation of State, County and Municipal Employees, AFL-CIO, whose 
members' pension assets total more than $1 trillion. "Each country has to step 
to the plate proportionately."

The Bee also found that many of the leading TARP recipient companies 
cross-owned large shares of other TARP banks.

Northern Trust Corp. received about $1.5 billion in government investments, yet 
its holdings in other TARP-assisted banks are about four times that amount. 
State Street Corp. got $2 billion, but holds nearly $24 billion in shares of 
other TARP recipients.

Each company has a stake in at least a dozen California banks, large and small, 
that received TARP funds.

Those commingled interests are partly responsible for the financial meltdown, 
Ferlauto said. "Ownership interlocks among these large financial institutions 
meant that no one was willing to rock the boat," he said, in the period leading 
up to the financial meltdown.

"There needs to be a lot more transparency on the part of large financial 
institutions as to how they act as fiduciaries of other financial companies," 
he added. "It's collusion of ownership."

To be sure, most of the investments by banks in other banks actually are 
investments of private clients managed by the banks. But those clients are not 
disclosed to regulators â another way beneficiaries of the bailout are 
shielded from public scrutiny.

When told of The Bee's findings, Robert Kuttner, author of a recent best-seller 
on the economic crisis, said they reveal a bailout program designed out of 
public view, and one that "reeks of favoritism and special treatment."

"TARP was designed that way," Kuttner said, "to concentrate power with almost 
no effective oversight. That, to me, is the scandal."

The lack of clear criteria for awarding TARP funds continued after the recent 
change in government, according to Kuttner and other experts.

"The Obama administration said it would offer transparency and openness. But 
the single most important thing they are doing is being done largely behind 
closed doors, and the design is by, for and in the interest of large banks, 
hedge funds and private equity companies," he said. "Because there are no 
explicit criteria, it's very hard to know if a Citigroup or a Goldman got 
special treatment."

Influence on policy faulted

The Bee's findings follow recent controversy over Buffett holdings thought to 
have contributed to the economic crisis.

Berkshire owns more than 20 percent of Moody's Corp., a top financial rating 
agency, making it by far the largest shareholder. Moody's has been faulted by 
many as enabling the global crisis by overvaluing toxic mortgage assets.

Although Buffett has been outspoken about the need for government intervention 
in the crisis caused by the mortgage meltdown, he has said nothing publicly 
about Moody's role.

Buffett also has decried derivatives such as "credit default swaps" â similar 
to an insurance policy, in which mortgage bonds and other financial instruments 
are insured against default â as "financial weapons of mass destruction." He 
criticized the profligate use of these unregulated financial tools, widely 
blamed as a root of the credit collapse.

Yet Berkshire has issued tens of billions of dollars in derivatives. In a 
letter to his shareholders, Buffett justified his derivatives as relatively 
safe and likely to yield vast profits.

Leading economists, however, said Berkshire's credit default swaps are much the 
same as those that sank American International Group Inc., the large insurer at 
the epicenter of the derivative fiasco.

"I assume that (Buffett) is being more responsible than they were," said Dean 
Baker, co-director of the Center for Economic and Policy Research, a 
Washington, D.C.-based think tank. "But this is a difference in quantity, not 
quality."

Simon Johnson, an MIT professor and former chief economist for the 
International Monetary Fund, said that despite the banking collapse, financial 
leaders such as Buffett have retained surprising control over the government.

"There's this general presumption that Wall Street knows best. But they may not 
know best for the taxpayer," Johnson said. "We've gotten into the habit of 
deferring to them a little too much â including Warren Buffet."

Call The Bee's Charles Piller, (916) 321-1113. The Bee's Phillip Reese 
contributed to this report.




      

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