Warren Buffett’s heavy investment in Goldman Sachs is getting more attention these days. At Berkshire Hathaway’s annual shareholder conference, there was some heartbreak that the Oracle of Omaha would stand behind the Vampire Squid in which Berkshire invested $5 billion in late 2008.
And on Charlie Rose on Friday night, Lloyd Blankfein pointed to that Berkshire investment as a sign that Goldman didn’t really need the bailout:
LLOYD BLANKFEIN: Hard to know. I’m not sure….
In the week after Lehman Brothers fell … we went to the markets ourselves. We did a transaction with Warren Buffett in which he made a big investment in our firm….
The government talk of bailout was some weeks later. So we took initiative. We weren’t waiting for government action….
Blankfein’s account misses part of the story — and this is a part of the story everyone should remember: Warren Buffett, at the time a campaign advisor and fundraiser for Democratic nominee Barack Obama, invested in Goldman on the understanding a big government bailout was coming.
This was Buffett on CNBC:
It would be a mistake to be buying anything now if the government was going to walk away from the Paulson proposal. Last week will look like Nirvana if they don’t do something.
This tells us something, not only about Blankfein’s account of the bailout, but also about what bailouts do — they enrich people like Warren Buffett.
And what about regulation?
These quotes from the weekend show that Buffett and Vice Chairman Richard Munger think regulation would help make them richer:
system, then we could be required to post collateral on
retroactive contracts…. If the bill passes tomorrow, we would
not have to put up a dime.”
Munger: “What we need is a new version of Glass-Steagall.
(Banks) should have a much simpler and safer way of doing
business.”
Munger, if he were put in charge of overhauling financial
regulation: “I would make Paul Volcker look like a sissy.”
