Gasparino Goes After Warren Buffet on Fox Business Today

Fox Business Channel | 1/31/2012 | Charlie Gasparino

[RinaseaofDs]

From 2004 up to 2009, Moody’s was 20 percent owned by BH, but the way they do business Buffett was plugged into what was happening.

There was HUGE pressure from the top to reverse proper ratings on dirtbag securities that deserved ZZZ ratings.

In the end, it was Buffett who bailed out Goldman, which was interesting because Goldman was investing based on ratings too, until of course the defaults started rolling in, and the CDO’s kept climbing in price. They were the first to try and leave the burning building, nailing the door shut behind them on their clients.

Buffett got a TEN percent dividend on preferred shares he bought for a song and then resold at a very handsome profit.

[LRoggy]

You are overstating a number of things here:

Buffett has ALWAYS been a passive investor in his company’s stock investments. He won’t make the investment if he feels he has to make management-level decisions. The pressure didn’t come from the INVESTOR, but from the competitive pressure to get the business in the battle between Moody’s, S&P, Fitch, etc. Most rated securities only chose one ratings agency as the official rater, while the others would publish unpaid-for reports to stay competitive in the marketplace.

Buffett was PART of the Goldman bailout, but was not the MAJORITY of it. That was the CDS payments made via AIG, where Goldman was able to collect over $12 billion in ‘insurance payments’ (that after all is what a CDS is for) via the TARP program and AIG bailout. Buffett’s PREFERRED STOCK ‘investment’ was $5 billion at 10% as you put it.

That capital infusion (not an equity investment, which Buffett has never made in Goldman) was very profitable in a cash flow sense, not in a capital gain one to Buffett but it came at the expense of equity shareholders not the general public or Treasury. He DID NOT SELL the holdings at a profit, he was REDEEMED at face value. $5 billion in and $5 billion out. He was a LENDER to them, not an INVESTOR.

The securities themselves obviously don’t deserve AAA ratings but the ZZZ is also inaccurate. They way they performed the proper ratings were somewhere in the Single-B category. There was cash flow from these and every time a mortgage was refinanced or paid off (via sale, etc) principal was paid down. The earlier sub-prime securities DID outperform the later ones pretty easily.

Don’t get me wrong, I am tired of his sainted reputation when most of us in the industry know him as a vulture investor (all of his preferred stock investments over the years have worked out well except for the US Airways one) and as a bit of a publicity hound in his later years, never mind the unusual personal life.

But lets criticize him based on the facts, not implications. I do believe that the ratings agencies needed to face civil lawsuits (criminal charges on the ratings are difficult to prove if ALL the major companies make the same judgment - just like if all the economists make the same prediction no one loses their jobs - LOL!).

[RinaseaofDs]

“Buffett has ALWAYS been a passive investor in his company’s stock investments. He won’t make the investment if he feels he has to make management-level decisions. The pressure didn’t come from the INVESTOR, but from the competitive pressure to get the business in the battle between Moody’s, S&P, Fitch, etc. Most rated securities only chose one ratings agency as the official rater, while the others would publish unpaid-for reports to stay competitive in the marketplace.”

I saw the Benjamin Moore purchase up close, and this is part of his shtick. He’s not going to leave a paper trail detailing what decisions he’d make if he were in the chair, but when BH takes a positive control position in your company, Buffett gets consulted one way or another, because if he sells his position, your company is going to get it in the grill.

I’ve seen this happen in government too. Some burearcrat will say, “It’s the sense of the ________, that you should be ____________ at this particular time.”

Sense of the board, the council, the committee, etc.

Buffett is the elephant in the room at all times. Paulson was CONSTANTLY in Buffett’s ear during the 2008 collapse, and nobody feels bad about it because Teddy Roosevelt was bailed out by JP Morgan in 1893 in the same manner.

The planet will be better off with him dead. I don’t say that about a lot of people, but he’s one of them.

This Keystone XL deal? Guess where the refineries in WA state are getting their stock (in part)? 200 cars a day from Montana from shale. BNSF gets all of that business.