Wednesday, January 20, 2010

If you've lost Warren Buffett... 

Warren Buffett, erstwhile supporter of Barack Obama, had a few choice words on "Squawk Box" this morning about the president's proposed tax on banks (emphasis added):

JOE: We've got so many things to go over, I've got - I don't even know where - I think of Wells and I think about the bank tax. Is that a good idea to pay for the GM bailout with a bank tax, Warren?

BUFFETT: No, I don't understand that. If it's some kind of a guilt tax or something of that sort because banks were among the whole United States that were saved back in 2008, everybody was taken care of then. And the banks, basically, somebody like Wells, it's cost them a lot of money to be in the TARP and it was basically forced upon them. (They) didn't want to take the money, but really had no choice. So that's cost Wells a lot of money. The government's made a lot of money off Wells. They've made a lot of money off Goldman. They've made a lot of money off J.P. Morgan. And where they're going to lose money, at least where its possible they'll lose money, is in the auto companies. So if you're going after the people you saved, you might say GM shareholders didn't get saved, the GM bondholders didn't get saved. What happened there is they kept employment. I'm the last guy to suggest that you should go and put a special tax on autoworkers. (Laughs.) If you're really looking for the people who benefited from government losses, you'd have to look there. Or if you look at Fannie or Freddie. Are you going to go and tax the members of Congress who ran Freddie and Fannie --

JOE: That's what I said! I can't believe you just said that. That's exactly what I - You could almost tax any company that was in business that wasn't going to be able to float any commercial paper, you could tax them too. Because they were saved - -

BUFFETT: Absolutely. In September of 2008 --

JOE: Don't give them any ideas! Warren, don't give them any ideas! They will, that'll be next.

BUFFETT: (Laughs.) No, what was done in the fall of 2008 was designed to save the American economy. It wasn't designed to save the banks, it wasn't designed to save me. It was designed to 309 million Americans and a good job was done. But the banks are the ones, you know, particularly I just named a few, they paid it back with huge interest. The government's made a lot of money on that. And to say that they should be paying for the fact that the government lost a lot, or may lose a lot of money in Freddie and Fannie and perhaps with the auto companies, it just doesn't make any sense to me.

But the point, of course, is to transfer wealth to (or protect the interests of) the supporters of the Democrats, and that means, in this case, the United Auto Workers. Same reason for the union exemption to the tax on "cadillac plans." Crony capitalism, always a risk regardless of the party in power, is as out of control as the rest of the federal government.


By Anonymous Anonymous, at Wed Jan 20, 02:55:00 PM:

All correct.

But the statists will never change their world view- they don't have it in them. They don't even understand what Buffett and kiernan are talking about in this exchange.  

By Blogger MainStreet, at Wed Jan 20, 03:28:00 PM:

The government is running out of places to tax without drawing the ire of the populous. They have made the banks the scapegoat and believe people will not care if they are taxed.

If this does not go through, someone else will be targeted. The only solution is to stop spending, eliminate government departments and become lean and mean.  

By Blogger Please don't drop my Chicken., at Wed Jan 20, 08:44:00 PM:

TH - I've been a long time reader (great stuff!) and would like to thank you for this post...

Buffett provides a very succinct argument which is hard to disagree with, and one can only hope certain politicians have the boldness to articulate something similar, either in the US or down here in Aus (the Tories appear to be going very Third Way in the UK).  

By Anonymous Opinionated Vogon, at Thu Jan 21, 07:50:00 AM:

I'm not so sure I absolve the banks as easily as Buffett does. How is it that the banks were able to pay all that money back so quickly in this record recession?

They are getting the money at no cost to them from the Fed and lend it out at 29% interest so they can generate massive profits and repay the Government.

Sounds like a shell game to me. Then Obama wants to tax the shell game. And Buffett objects to the tax and not the game?  

By Blogger Charlottesvillain, at Thu Jan 21, 01:20:00 PM:

OV, don't forget the part where if the loans go bad, the government steps in and buys them, or relaxes reporting requirements so that insolvent institutions can appear to be solvent.

As long as the big financial institutions are operating with a put on their bad investments, and are able to borrow money for free, there should be a cost associated with this deal, IMO.  

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