Lou Dobbs' Attack on Warren Buffett a Case of Misplaced Bailout Rage
CNN news anchor Lou Dobbs, who is bitterly opposed to the $700 billion financial bailout that passed through Congress on its second attempt Friday, railed against famed investor Warren Buffett on his program last week. Buffett, the richest man in the world with a net worth in excess of $60 billion, recently purchased huge equity stakes in Goldman Sachs and General Electric on very good terms. Buffett has also come out strongly in favor of the bailout, stating that doing nothing would result in an "economic Pearl Harbor" for the American economy.
On his show which aired Thursday evening, Dobbs expressed disgust at Buffett's backing of the bailout and accused him of engaging in self-serving, alarmist rhetoric and profiteering at the expense of the American people during a time of economic crisis. Dobbs implied that Buffett, whose words carry enormous weight, was essentially jawboning the markets higher, thereby enriching himself while callously leaving the taxpayer to foot the bill.
Dobbs' attack on Buffett is a shameful display of misguided populist anger. It is completely unjustified and profoundly misleading. Warren Buffett played no part whatsoever in creating the mess the financial markets currently find themselves in. Quite the contrary, he has consistently warned of the massive bubbles building up in the markets and refused to invest in them, hoarding huge sums of cash instead. In his 2003 annual letter to shareholders, he referred to derivatives, which include the "toxic" mortgage-backed securities that Wall Street firms are now so desperate to offload, as ticking "time bombs" and "financial weapons of mass destruction," warning of the massive systemic risk they posed to the US economy. Buffett is the absolute antithesis of the wheeling and dealing "fast money" types that created this disaster. His recent acquisitions are a textbook case of the sound investment principles he has practiced and preached his entire life: be greedy when others are fearful and fearful when others are greedy, and buy assets that are trading below their intrinsic value and hold on to them for the long run.
Buffett is also a profoundly decent human being and model example of what an American businessman should be. He is the world's most generous philanthropist, having bequeathed virtually his entire fortune to the Bill and Melinda Gates Foundation. Buffett has come out strongly on the side of the middle class. He supports the inheritance tax paid by the wealthiest 2% of the population, arguing that it is essential to the promotion of a meritocratic society and that the $30 billion in annual revenue it generates is necessary for the funding of social programs. He believes the tax system has become heavily skewed in favor of the rich and that wealthy Americans should be expected to pay more. In an interview with 60 Minutes last year, he noted that he pays less tax as a percentage of income than all of his employees, including his office secretary.
Buffett believes that the US Treasury actually stands to make a profit over time from the bailout, so long as they purchase assets from the banks at current market rates. "They'll pay back the $700 billion and make a considerable amount of money if they approach it like that," he said in a recent interview. "I would love to have $700 billion at treasury rates to buy fixed-income securities - there's a lot of money to be made." In other words, the need for an emergency government rescue plan actually provides an opportunity for US taxpayers to earn a sizeable profit at the expense of Wall Street, essentially scoring one for average Americans for once.
The "Oracle of Omaha" is a wise and trustworthy man. Taxpayers would do well to listen to his advice and ignore the likes of Dobbs.