Thursday, August 6, 2009

Did Warren Buffett Front Run Tax Payers?

The attack on Warren Buffett continues.

The latest to jump on the pile is Karl Denninger.

He makes the charge that Buffett may have taken advantage of taxpayers, when buying his stake in Goldman Sachs:

...was he really just making a bet? The evidence says otherwise; Warren's statements both at the time and later one made clear that he had every expectation, and perhaps even inside information, that the government would not allow these firms to fail. That is, he didn't make a bet - he jumped in front of the taxpayer, a form of legal "front running", to garner a guaranteed profit...Warren may be a shewed investor, but of late, it appears that the lesson Warren is really imparting is that once you amass a big amount of money the most effective way to profit is to figure out who will extort bailouts for their bad behavior from the government, then front-run that bailout in those firms.
There are a lot of questions that need to be answered surrounding the period when Buffett made his investment in Goldman Sachs.

First, there is the curious trading I have previously identified by the Senate's No. 2 Democrat, Dick Durbin. Did Durbin buy Buffett's Berkshire Hathaway stock after learning that Buffett via Berkshire was going to buy into Goldman? The public timeline suggests he may have.

Now, Denninger raises the question as to what went on in meetings between Buffett and the government. Was Buffett assured before he bought stock in Goldman that the government would not allow Goldman to fail?

And just who was buying stock in Goldman and Berkshire that caused the stocks to climb just before it was publicly announced that Buffett was going to take a position in Goldman?

Note to readers: I will not be waiting up nights for news that the Securities and Exchange Commission. or Congress, will start such an investigation.

(Thanks to Taylor for the link to Denninger column.)

1 comment:

  1. Wenzel,

    Not to worry, for I am waiting up nights for this. As well as a full investigation, with indictments, into the Bernanke-Paulson-Lewis trifecta of fun.