Skip to comments.Is Barack buddy Buffett betting on bank bailout?
Posted on 08/29/2011 1:11:00 PM PDT by crosshairs
If you're looking for proof that Too Big to Fail is still alive, and that Washington won't leave large financial institutions to the mercies of capitalism, consider billionaire Obama fundraiser Warren Buffett's $5 billion bet on struggling Bank of America.
Buffett, who recently won plaudits for advocating higher taxes, has spent four years betting on bailouts and big government -- and tilting the playing field in that direction by putting his money and prestige at the service of Barack Obama.
Buffett gave the maximum donation to Obama in 2007 -- $4,600 to his campaign, and $28,500 to the Democratic National Committee -- and also hosted a fundraiser for Obama in Omaha. By mid-2008, Obama had tapped Buffett as an official economic adviser to the campaign.
When Wall Street nearly collapsed in September 2008, Buffett rallied behind the Troubled Asset Relief Program, and bet big on its passage. He put $5 billion into failing investment bank Goldman Sachs. "If I didn't think the government was going to act, I would not be doing anything this week," Buffett said on CNBC at the time.
Obama had campaigned against policies that mainly serve wealthy Americans, belittling the notion that "somehow prosperity will trickle down." Obama was the only man in position to block the bailout, but he voted aye and took much of his party with him.
As Congress was passing TARP and Republicans were falling in the polls, Buffett made another investment in Obamanomics, taking a $3 billion stake in General Electric.
Goldman got $10 billion in TARP funds, and by late 2009 was reporting record profits. Buffett made more than $3.6 billion in profit off the investment.
GE never got TARP money, but a month after the Buffett investment, the Federal Deposit Insurance Corporation gave GE a $139 billion guarantee on its debt, and GE was a regular recipient of other Federal Reserve bailouts besides TARP. Then GE forged an intimate alliance with the Obama administration, boosting investments in greenhouse-gas credits, embryonic stem cells, wind power, battery technology, and trains -- all technologies subsidized by Obama. GE Chief Executive Officer Jeff Immelt, who lauded Obama's "reset capitalism" in which government would be an "industry champion," became Obama's "job czar."
More recently, Buffett said he's considering investments in ethanol pioneer Archer Daniels Midland, nuclear-power king Exelon, and government contracting giant General Dynamics. ADM was built on close ties to politicians, as was Exelon. ADM relies on ethanol subsidies for profits, while Exelon lobbies for greenhouse-gas restrictions that will profit the company's nuclear-power holdings. And General Dynamics, with $139 billion in federal contracts since 2000, is also cozy with government.
In this light, and recalling his Goldman-bailout profit, consider Buffett's investment last week in Bank of America.
Investors had been dumping Bank of America shares, presumably over worries about the mortgages it holds. But B of A holds ugly mortgages mostly because it bought Countrywide in 2008 -- a move government officials encouraged because they thought it would stabilize the financial sector. Similarly, B of A bought up Merrill Lynch with some nudging from the Treasury Department.
Bet? No, no bet. He was informed in advance.
I’ve never posted this word before: duh!
He gets a 6% dividend rate on his investment each year...BEFORE any of the common stockholders geta dividend.
He got warrants to buy several hundred shares at a price hat is NOW below the bank's share price. If he exercised them tomorrow,a nd then sold..he has a ONE BILLION+ dollar profit already..and it could be more if the stock goes up.
There is virtually NO downside, because if the bank tanks, Buffet can expect that Obama will prop-it up again..TOO BIG TO FAIL...
Buffett’s going to have a hard time spending all that money in hell.
Hopefully the regime will be put out of office and an honest DOJ can Madoff him.
Looks like the author discovered the allure of alliteration.
The Orifice of Omaha.
Boehner must stop this (and a lot of other things).
It is not just the potential for a bailout, it is an assurance the regulators will NOT force BofA and others, like Wells, another Buffett holding, to write down their illiquid mortgages on their books now.
For God's sake... Boehner can't even break, or stop, his own heavy smoking habit.
Here’s a snapshot of Bank of America as of March 31st:
Well.....there’s the proof. I was worried a little bit about those Charmin commercials with the bears, but there’s no denying this photo.