For many years, I’ve been a fan of Warren Buffett’s long term approach to value investing. Understanding the value of a company, regardless of its momentary stock price, is a great long term investing strategy.

But it pains me whenever I read commentary from Buffett that glosses over reality or is somehow self-serving. His OpEd in the NYT today – Pretty Good for Government Work – paints an artificially rosy picture of the Bailout, ignores the negatives, and omits his own financial interest in government actions.

What might he have written if Sir Warren was dosed with some sodium pentothal before he sat down to pen that “Thank you” letter? It might have gone something like this:

>

DEAR Uncle Sam Sucker,

I was about to send you a thank you note for bailing out the economy . . . but then some nice men dressed in Ninja outfits came in and shot me full of truth serum. That led me to make one more set of edits to my letter thanking you for saving the economy.

It also helped me recall some things I seemed to have forgotten in my other public pronunciations about the bailouts.

I suddenly recalled who it was who allowed the banks to run wild in the first place: You. Your behavior before, during and after the crisis was the epitome of a corrupt and irresponsible government. You rewarded incompetency, created moral hazard, punished the prudent, and engaged in the single biggest transfer of wealth from the citizenry of the United States to the Wall Street insiders who created the mess in the first place.

Kudos.

Before I get to the bailouts, I have to remind you that in:

• 1999, you passed the Financial Services Modernization Act. This repealed Glass-Steagall, the law that had successfully kept main street banking safely separated from Wall Street for seven decades. Even the 1987 market crash had no impact on Main Street credit availability, thanks to Glass-Steagall.

• 1997-2010, you allowed the Credit Rating Agencies to change their business model, from Investor pays to Underwriter pays — a business structure known as Payola. This change effectively allowed banks to purchase their AAA ratings, and was ignored by the SEC and other regulators.

• 2000, you passed the Commodities Futures Modernization Act. It allowed the shadow banking industry to develop without any oversight by the Commodity Futures Trading Commission, the SEC, or the state insurance regulators. This led to rampant creation of credit-default swaps, CDOs, and other financial weapons of mass destruction — and the demise of AIG.

• 2001-04, the Fed, under Alan Greenspan, irresponsibly dropped fund rates to 1%. This set off an inflationary spiral in housing, commodities, and in most assets priced in dollars or credit.

• 1999-07, the Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability.

• 2004, the SEC waived its leverage rules, allowing the 5 biggest Wall Street firms to go from 12 to 1 to 20, 30 and even 40 to 1. Ironically, this rule was called the Bear Stearns exemption.

These actions and rule changes were requested by the banking industry. Rather than behave as adult supervision, you indulged the reckless kiddies, looking the other way as they acted out. You were the grand enabler of the finance sector’s misbehavior. Hence, you helped create the mess by allowing the banking sector to run roughshod over decades of successful constraints. (Kudos again on that).

There were voices warning about the upcoming crisis, but you managed to turn a deaf ear to them: Warnings about subprime lending, problems with securitization, against the false claim that residential real estate never went down in value, or that the models forecasting VAR were wildly understating risk. An economy driven by growth dependent upon credit fueled consumption was unsustainable, and yet you encouraged that reckless credit consumption. The compensation schemes for Wall Street were hilariously short term (ignored by you); the crony capitalism of Boards of Directors that undercut market discipline was similarly ignored. You encouraged the hollowing out of the US economy, allowing it to become increasingly “Financialized” at the expense of industry and manufacturing. What was once a small but important part of the economy became dominant, yet unproductive, with your blessing.

Bottom line: You were at a loss for understanding the many factors that led to the crisis in the first place.

When the crisis struck, you did not seem to understand the role you should play. Instead of stepping up to halt the financialization, to unwind it, you gave away the shop. You failed to extract concessions from firms on the verge of bankruptcy. Your negotiating skills were embarrassing. In the face of meltdown, you panicked.

You could have undone the decades of radical deregulation at that moment. You could have fired the incompetent management, wiped out the shareholders who invested in insolvent companies, gave the creditors and bond holders a major haircut for their foolish lending. Instead, you rewarded them for their gross incompetence.

The solutions you ran with were ad hoc, poorly thought out, improvised. You crossed legal boundaries, putting the Fed in the position of vio0lating its charter and exceeding its mandates. You created a Moral Hazard, the impact of which may not be felt until decades in the future.

Very few of your senior elected and appointed officials understood what was going on.

Rather than offer an intelligent response to the crisis, you delivered brute force: Trillions of dollars were thrown at the problem, papering over its symptoms but not its underlying causes.

Well, Uncle Sam, you delivered a motherload of cash. Considering the dollar sums involved, your actions were remarkably ineffective. What was left over afterwards was a wildly over-leveraged consumer whose credit limits had been reached; State and municipal budgets were heavily dependent upon that excess consumer spending, creating huge budget holes because of it. Net net: The resultant economy was in the worst recession since the Great Depression.

As a student of the Great Depression, Ben Bernanke should have had the best grasp – but his bailout of Bear Stearns revealed him to be just another banker, intent on saving the banks – banking system be damned. To give you a clue of exactly how lost Hank Paulson was, he spent his time praying, and creating documents that exempt himself personally for liability. He’s from Goldman, so we know that “team first” ain’t exactly his style. Tim Geithner, who did such a stupendous job overseeing the banks in the first place, was n way over his head. And while I never voted for George W. Bush, I give him great credit for hiding under the bed and pretty much staying out of everyone else’s way. I would call him clueless, but that wouldn’t be fair to the legions of clueless around the world.

Sheila Bair grasped the gravity of the situation earliest, and put numerous failed banks through the insolvency process. If we were smart, we would have allowed her to work her way through the entire finance sector, effecting a GM-like prepackaged bankruptcy for Citigroup, Bank of America, Merrill Lynch, Morgan Stanley, AIG, etc. It would have been painful as hell, but we would be much better off had we allowed her to tear the band aid off quickly. Instead, we are suffering through a death of a 1000 cuts, Japanese style.

I would be remiss if I failed to mention my personal positions in this: I made a killing in Goldman Sachs and GE. My investments in Wells Fargo would have been a disaster if not for you. Don’t even get me started with me being the largest shareholder in Moody’s – that was some clusterf#@k. And considering all of the counter-parties that Berkshire Hathaway has, we risked being just another insolvent investment firm along with everyone else had nothing been done.

So I must say thanks to you, Uncle Sam, and your aides. In this extraordinary emergency, you came through for me — and my world looks far different than if you had not.

Your grateful but wide-eyed nephew,

Warren

Category: Bailout Nation, Bailouts, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

114 Responses to “Dear Uncle Sucker . . .”

  1. Mike M says:

    That was brilliant! Thanks!

  2. rip says:

    Perfect.

    Saint Warren is looking more like the devil everyday as it plays out. Duh. It’s about OPM.

  3. obsvr-1 says:

    Now there is an Op-Ed that should be printed across the land !!!

  4. [...] Barry reacts to Warren Buffett's bailout love letter.  (TBP) [...]

  5. BuffaloBill says:

    First I read his “thank-you” in The NYT and then I was subjected to more of this through his phone conversation with CNBC.

    BR – this was an ideal antidote to history’s rewrite.

    Bravo!!!!!!

  6. financial says:

    Thanks Barry:

    Your are finally back with commentaries like these. Love the no BS view of the world. I don’t know but I get the feeling that Buffet has been off his feed for a while now. Is moved from value investing to “how can I scan the government to make me whole” .

  7. dead hobo says:

    Now you understand my reluctance to accept that the world has a few anointed souls who possess investment clairvoyance.

  8. Mannwich says:

    What an astonishingly arrogant Op-Ed by Warren, especially on the heels of his partner telling the rest of us to “suck it up”. I would argue the real entitlement class sits at the very top of the food chain.

  9. carleric says:

    When I viewed the documentqry film I.O.U.S.A. I was appalled at Buffet’s failure to grasp reality….I now am convinced it must be dementia…..even Charley Munger is lapping it up at the public trough…..nevertheless great commentary. We could all use more of this. Thanks

  10. crjdriver says:

    Excellent BR!
    Why does none of this ever get discussed in the main stream media? I would really appreciate your view on that.
    Why do we have the complete inability to accomplish anything that the majority of Americans either slightly left or right would view as prudent?

  11. Darkness says:

    On the upside (?) we might get another round to send these guys to the poor house yet.

  12. EAR says:

    Perfect for the “What’s a CDO?” crowd. I’m sending this out to the ones I love.

    Thanks for everything, BR. Keep it comin’.

  13. Potato says:

    “Sheila Bair grasped the gravity of the situation earliest, and put numerous failed banks through the insolvency process.”

    Did she go through the process though, or shoot from the hip and add to the confusion of the times?

    ~~~

    BR: I am not convinced that WAMU was anything but insolvent — and Bronte Capital admits to being long that POS

  14. Bill W says:

    That’s the best thing I’ve read in a while.

    According to Bernanke, we had to bail out the big banks or repeat the Great Depression, when banks were allowed to fail. He pretends that the resolution authority cannot exist, when it is convenient for his argument. It was OK to take illegal actions in some cases, but the the counter-parties to AIG could not possibly lose money due to legalities.

    The bailout had everything to do with preserving the status quo, nothing to do with making our capitalist economy stronger.

  15. “Why does none of this ever get discussed in the main stream media?”

    http://involuntaryservant.blogspot.com/2009/03/bought-and-paid-for-central-bankster.html
    ~~

    “Thanks Barry:

    You are finally back with commentaries like these. Love the no BS view of the world.”

    x2

  16. Let us understand that Berkshire Hathaway has had a significant position in Moodys well before the boom….

    Also, I still have received no feedback as to how Berkshire Hathaway can avoid marking its equity positions to market in its audited financials — any color on this would be greatly appreciated…

    http://alaricinvestments.blogspot.com/2010/10/us-is-banana-republic-part-2.html

  17. ezrasfund says:

    “Rather than behave as adult supervision, you indulged the reckless kiddies, looking the other way as they acted out. You were the grand enabler of the finance sector’s misbehavior. ”

    Great article, Barry, but this line alone explains it all too well. Imagine the typical adult whose kid got into the liquor cabinet and then crashed the family car. The kid is in jail, but my guess is that his uncle is going to “bail him out” if no one else can. Just why Uncle Sam loves the banks like they were his own flesh and blood? I guess they are.

  18. Michael M Thomas says:

    It’s about time to inoculate ourselves against the total tolerance for bulls**t that goes by the name of “Charlie Rose Syndrome” and recognize the sad fact that Warren Buffett has aged into an avuncular old phony.

  19. Long term says:

    To compose thought and writing at this level and give it away free to readers makes BR a great and very new media man.

  20. stonehouse says:

    Barry, fabulous. This should go viral by end of day.

  21. David Merkel says:

    Vigorous applause here. Well done.

  22. Johnny99 says:

    Every time I try to leave you, BR, you pull me back in.

    Take a bow for this, my good man. Well done.

  23. MS says:

    I loved your last piece. Brilliant

    Matt

  24. [...] Warren Buffett sends a thank you note to Uncle Sam for the bank bailout.  (NYTimes also Kid Dynamite, Business Insider, Big Picture) [...]

  25. Fred C Dobbs says:

    I hope you feel better BR getting this off-your-chest. It is irritating to see foolish things published by foolish people repeatedly. You have a lot of patience, but this must have been just one straw too many.

    You are absolutely right. There was and is a lot of blame to pass around, including us who forgot the importance of ‘buyer beware’ (Caveat Emptor).

    But it is still stale news. Have you said anything in this ‘Sucker’ letter that you didn’t say before in your well-written, well-received book? We all need to move on. The past is history.

    What are you and I going to do, going forward? Are we going to rely on Big Government, in its infinite wisdom and power, to take care us? Can an abstract entity actually have feelings for us and actually care? If not, how are we going to take care of ourselves, and those who depend on us?

    Should we entrust our retirement funds to the market, which, like any other casino, is tilted against the individual player? Should we sell and leave the US and go to a better managed country? If so, can you suggest any such countries?

    What can we do? What should we do? With respect, I think you are on Wall Street, a keen observer, and one who can help us. What do you think we should do?

  26. obsvr-1 says:

    @stonehouse

    Barry, fabulous. This should go viral by end of day.

    —- Reply

    Turn the narrative into a animation (like the QE2 “Bernank” bears) and it would go viral across youtube. If ones knows the source of the ‘bears’ perhaps they could forward to them to do the creative process.

  27. Ambiance says:

    Excellent writeup BR, it’s rare to see a good writeup regarding the governments culpability in this mess.

  28. [...] responses to financial crisis.  For an alternative, hilarious and sobering take on this op-ed, go here. The government backstop, Fed put, whatever you want to call it has not gone [...]

  29. Patrick Neid says:

    The ink flows easy when you have a five billion dollar position in GS at 115 instituted under Bush’s leadership!

    http://latimesblogs.latimes.com/money_co/2008/09/warren-buffett.html

  30. daf48 says:

    BR seems to think the government doesn’t include the banksters and the corporatists. The White House, Senate, and HOR are paid employees of the private sector. Dudley buying bonds from Goldman? Tell me the game ain’t rigged.

    ~~~

    BR: I keep assuming that everyone here has read Bailout Nation. My error.

    There are 7 chapters in the book that lay blame right at the CEOs of the major banks and their handlers — including one called “Dotcom Penis Envy.”

    Please read the damn thing so you understand where I am coming from . . .

  31. BR:
    I echo everyone else. Also, it is sad to see the Oracle go down hill these last few years. He used to be a shining light in a dirty ocean, but it seems he has shed all pretense in the last 5 years or so.

  32. MM says:

    Finally, someone telling it like it is re: “the greatest investor of all time”- 1 of best rants you’ve written- thx so much- as I like to say- “getting to the truth”

  33. NickAthens says:

    Simply Awesome, great way to make a point.

  34. ileb says:

    Nobody here is going to like what ZeroHedge is reporting about Buffett. How about this slap in the face? Mr. ( I am so moral and wise) Buffett will be receiving a medal of honor from none other than Pres Obama.

  35. NormanB says:

    The thing to remember about Buffett, Soros, Gates, et al is that whatever they say its to futher their own fortune. Anyone who believes that these people are acting for the good of the country has their head up their ass. Further, to think that these folks can come out of their area of their expertise (long term investing, currency trading, keeping a monopoly going) and give significance to other matters is again looking in the wrong place.

  36. b_thunder says:

    Right, Medal Of Freedom For the Nephew Buff from Uncle Sam-bama!

    http://www.reuters.com/article/idUSTRE6AG4MU20101117

  37. beaufou says:

    It is very sad that you have to look for the truth in the media world, it is never delivered to your door or on your screen, never.
    Well done BR.

  38. franklin411 says:

    Re-address it to the people who are TRULY to blame: The American People, who voted time and again to support politicians promising prosperity through deregulation, tax cuts, and outsourcing.

  39. ubnutsagain says:

    BR … perhaps tomorrow you can write a sequel so we’ll know how you really feel. LOL

  40. Herb2 says:

    The past is history, and we should never learn from it or hold anyone accountable. The sheople shall be sheared. A smart herdsman will tend to his flock, but a banker can be too far removed to see beyond his niche.

  41. constantnormal says:

    Whatever happened to Warren’s derivative play, wherein he sold a bunch of calls against the S&P index, using European-style options? How well does he stand to make out if the EU disintegrates (and presumably the euro is no more) before they expire?

    Does he get a pass on them, regardless of where the S&P index stands in 2019 (or whenever they were good until), due to the currency they were in being busted? As I understand it, these options do not permit the writer to “buy them back” prior to expiration.

    Just wonderin’

    (anyone with a better recollection of exactly how this was structured is urged to refresh my memory)

  42. Rugby1 says:

    Thank you so much for writing that piece. I read his self-serving opinion piece and just about projectile vomited while having my head spin around ala “The Exorcist.” What a load of self-serving crap. Although I guess if the entire government went around bailing out my crappy investment decisions and protected my reputation maybe I would write them a thank you letter as well.

  43. nebyarg says:

    Thank you Barry!
    What I missed “Buffet” saying while influenced by truth serum was that this US government bailout of banks, auto and insurance companies was the greatest privatization of profits and most horrific socialization of risk and liabilities ever! Is this capitalism and democracy? I want non of either!

  44. Lugnut says:

    A very accurate arrow from your quiver. That’ll leave a mark.

  45. not-affiliated-with-Wall Street says:

    I have admired Buffett for sharing his special store of investment knowledge very generously with the rest of us. I used to tell people he is “the only honest businessman in America.”

    It really saddened me when he fell in with the Goldman Sachs, ruining the reputation he had for so many years.

  46. saunderscc says:

    Don’t see “ad hoc” coming out of Warren.

    Otherwise, spot on.

  47. @Fred C Dobbs…

    Per your “Big Government” slant, when government is well-poised to succeed at establishing justice, insuring domestic tranquility, providing for the common defense, promoting the general welfare and securing the blessing of liberty to ourselves and our posterity, I will take it big or little. However, its present, miserable failure to bolster those long-established principles does raise the question of whether its size is a major culprit.

    @obsvr-1…

    The creator of the QE2 “Bernank” bears piece was on CNBC this afternoon. Apparently, the creative was done at xtranormal.com.

    @BR…

    Do you think Buffett believes the government rescue will prove lasting? In other words, is he assuming the rescue could deepen if need be, and forever backstop the present arrangement whose leverage continues to lack a physical economy capable of keeping whole the myriad of securities sitting atop it?

  48. obsvr-1 says:

    • 1999, you passed the Financial Services Modernization Act. This repealed Glass-Steagall, the law that had successfully kept main street banking safely separated from Wall Street for seven decades. Even the 1987 market crash had no impact on Main Street credit availability, thanks to Glass-Steagall.

    And the Master (Gangster) behind the lobbying to Gut Glass-Steagall

    The Man Who Shattered Our Economy

    http://www.truthdig.com/report/item/the_man_who_shattered_our_economy_20101117

  49. KeithO says:

    Hat’s off. Thank you

  50. cpd says:

    Great letter! It got mentioned on Dylan Ratigan’s show today which is a good thing. You really should send it to all the big bloggers, Huffington Post and any mainstream media outlets you can get to publish it. You make a lot of important points, not just the self-serving arrogance of Buffet.

  51. Ed says:

    I thought that was an Onion piece. Wow. It’s that naked these days. Damn.

    -Ed

  52. Apparently, what’s good for Warren Buffett is good for America, and vice versa.

    I wonder if Buffett will be buying into the new GM IPO, as he’s apparently taken the mantle from them as all that is good and proper and right about America. But Buffett never made a goddamn thing. He just shuffled money around. Honoring him as some kind of modern-day hero is exhibit A for how shallow and vapid and vain our culture has become. In a healthy economy, the financial system exists to serve the productive efforts of society, not the other way around. We have one sick economy.

  53. Arequipa01 says:

    the ‘medal of freedom’ is a mark of shame. Tenet got one, you know the ñoco who sat on his hands as a sitting president and vice president colluded to commit treason by outing a covert agent. Wear that medal Buffet, just don’t take the embedded chip out, they’ll just come back and replace it. Güevón…

  54. dss says:

    @BR,

    One of the best take downs that I have ever read, plus it was quite entertaining. Depressing, but truthful. Not much truth telling in the world today.

    Thanks, Barry, you are one hell of a writer.

  55. cyaker says:

    Barry well said unfortunately we are the suckers

  56. RR111 says:

    @obsver – Here is the link to the website where anyone can make a video like the “Bernank” one that you referenced: http://www.xtranormal.com/

  57. Wes Schott says:

    …wow, well said, that almost rivals a Matt Taibbi takedown…sweet

  58. FMB says:

    Thank you so much for this piece!

    When is CNBC (forget the NYT, they’re too far gone for reform) going to wise up, if ever, instead of sucking up to Buffett, Soros, Roubini and the other oinkers????? Maybe you could do a piece on the bozos who decide what to air on CNBC and on the editors who choose what to write about in the NYT. Bet they’ve got some ugly skeletons in their closets…

  59. Ernst says:

    Outstanding work, Barry – you’ve mentioned many of the various things-that-got-us-here in previous writings, but this one really nails it.

    Cheers,

    -Ernst

  60. Rondy says:

    Tour-de-Force, my friend…. Tour-deeeeee-Force!!!!!!!!!!!!!!!!

  61. soloduff says:

    BR: Thank you for an excellent summary; the style was satirical, thank goodness, not vituperative. Buffet is a very bright guy with a talent for business and personal promotion, but his conceptual set does not exceed the conventional corporate unwisdom. I would only add the theme that your narrative exemplified: Business-as-usual resolution to what was perceived as an unusual capitalist crisis; guaranteeing repeat crises cum repeat bailouts in the future, i.e., no serious regulatory regime change in the offing–which means that the bleatings of the reformists will continue to fall on deaf ears. (Of course the reformists won’t quit their bleating; their ideological role is to pretend that we can have our capitalist cake and eat it too, with reforms. Their motto: This Time Will Be Different.) Bethany McClean–the Cassandra of the Enron house of cards–was on the tube the other day and opined that the recent crisis proved that our Solons learned nothing from the Enron debacle. Ditto for the next crisis, and the next . . . .

  62. HEHEHE says:

    BR – that one is your Mona Lisa! Kudos my friend! I would only mention Warren’s sizable holdings of BofA when the SHTF and also how much his American Express shares benefited when they were given Bank Holding Company status. End of the day Warren B turned out to be just another shyster with no pride.

  63. MikeW says:

    The shame of it is the size of Buffet’s NYT readership vs. Barry’s – if there were any justice, they’d all get to read both & make up their minds.

  64. dmlopr says:

    Awesome work, Barry. I’m keepin’ this one on my wall.

  65. jad714 says:

    Well written, sir. America is in a mess. Poor government choices leave us in a rut that the citizens will have to climb out of. However, I am confident in the spirit that started this country. We will pull through this like everything before it.

    http://www.philstockworld.com

  66. [...] am not friends with Warren, I am friends with Barry who can’t afford the same coverage in the NY Times, but writes better. Barry is Joe the plumber of finance , but Joe the Plumber is not cool anymore. Joe is out of [...]

  67. liviu says:

    awesome piece, Barry.

  68. [...] The Big Picture corrects Warren Buffett’s NY Times OpEd I suddenly recalled who it was who allowed the banks to run wild in the first place: You. Your behavior before, during and after the crisis was the epitome of a corrupt and irresponsible government. You rewarded incompetency, created moral hazard, punished the prudent, and engaged in the single biggest transfer of wealth from the citizenry of the United States to the Wall Street insiders who created the mess in the first place. [...]

  69. fundaman says:

    Great piece! Today I am happy that I started following this blog…

  70. GKW says:

    Congratulations! “Dear Uncle Sucker” is one of the best, clearest, most concise, and just “spot on” analyses of the past few years financial shenanigans I’ve read. Non partisan, everybody takes a hit. And funny to boot, in a depressing, “WTF” kind of way.. Thanks!

  71. [...] Buffett on the Crisis – “Uncle Sam, you delivered.”. link. Ritholtz on Buffet on the Crisis – on the failures of government from 1997-2010. (link) [...]

  72. partimer1 says:

    great one! why doesn’t NYT publish this one?

  73. MJS says:

    We owe you a “debt” of gratitude for your “revised” and more accurate letter to dear Uncle Sucker.

    Maybe a series is in order? A second letter from Pimco’s, Gross and El-Ehrain?

    – Michael

  74. KOD says:

    Barry,

    I know you are an extremely busy man, but you have officially become my hero!!!……. Your piece, ” Dear Uncle Sucker” was, quite honestly, the best piece of commentary I have ever read…….. Seriously!!! For several years, Buffet was so iconic, in my view, and could really do no wrong. Everything in your article was dead on!!!……. To give you a bit of background, I am a financial planner ( do not practice) of nearly fifteen years and a hard core Capitalist…… I share your exact views regarding these ridiculous bailouts!!…… Again, I know you are busy and did not want to take much of your time. Please keep producing commentaries like this. They really are inspiring and informative to even financial vets like myself.

    -KOD

  75. JC says:

    Barry,

    Thanks for laying it out in clear simple language. Hopefully some people with far more clout than I have – will stand up and take notice. Unfortunately, I don’t think anyone will take off the blinders until we have actually lurched off the cliff and are close to impact. Thanks again

    — John

  76. KC says:

    Barry -

    Thank you for having the guts to finally speak the truth about the
    Financial Crisis and it’s true causes.

    If our elected leaders could speak with this clarity and forcefulness,
    maybe we could actually learn from this painful experience.

    One question, how could you leave out the Community Reinvestment Act (CRA),
    which basically forced lenders to make home loans to unqualified buyers in
    the name of “social justice” or “racial fairness”?

    Thank you for spelling out what a large number of people are feeling about
    our government and the cause / effect of our actions.

    As the old saying goes ” the road to hell is paved with good intentions”.

    What about a follow-up article on specific action recommendations from this
    point forward?

    Respectfully,

    -Ken

  77. obsvr-1 says:

    CNBC picks up the blog post ! Now for NYT and the syndicates to pick it up;

    http://www.cnbc.com/id/40255045

  78. D.S. says:

    Why aren’t more people decrying this behavior especially as a new congress has the ability to “clean it up” as they claim they want to. Gee, I wonder how many banking dollars were donated to election campaigns this year…I bet it was unprecedented.

    Keep ringing the bell of warning!!

  79. Dutch says:

    That’s about the best I’ve read…Great article , now I just want someone to fucking listen…oh well…Dutch

  80. nelson says:

    you have described exactly what went down, starting many years ago. thanks for telling it just the way it was and is still today. i wish most americans could read and fully understand this. if so, they would demand more changes in congress and the obama administration that what they got in the last election. let’s pray for some sanity in 2012. if we make it that far.

  81. Theo says:

    The article is pretty messed up Barry. Many people profited from the actions, including yourself. I am sure the credit crisis, and how you maneuvered it, caused a spike for your money management services. (I see it in your swagger from pre-crisis to post-crisis interviews.)

    So I am curious, why so angry about Mr Buffett saying thank you? Despite all the negative you noted, you should be saying thank you too.

    He was simply giving some encouragement to a group of people that kept hearing what you touted over and over again. One article of appreciation is not a bad thing.

    I know you profited from the mess, and are still profiting from it. I too profited from it too, hence my lack of enthusiasm for your article. (I document mine actions here echotoall.blogspot.com)

    The crisis made you one of the new “kings of the street”. Smile about it, don’t wear it with such disdain.

    Stay classy Barry,

    Theo

  82. DH says:

    Great article Barry!

    -Dick in Boise

  83. Tom says:

    Aloha Mr. Ritholtz:

    What an honest article!!!

    Please make sure that the key members of Congress and Pres. Obama and all his cabinet members get a copy of your article. So should the deans of all the business schools.

    You are a patriotic American who truly understands the “truth” and the gravity of the situation.

    Also, I suspect that the stock market is “raked” because it appears that whoever controls the S&P 500 E-min futures market controls the direction of the overall stock market since the volume of the E-min contracts traded is small (around 1.5 to 2 million traded daily) and stock prices usually follow the direction of the E-min futures prices. Two separate governmental agencies oversee these markets, the CFTC over the E-min futures and the SEC the stock market. Please check into that. I would like to hear your opinion on that.

    THANKS,
    Tom

  84. James says:

    I have been a licensed securities representative since 1988 and started to see this crisis unfold starting with the failure of the 2 Bear Stearns hedge funds summer of 2007, followed by the problems of Ambac and MBIA Inc. I have yet to read such a comprehensive article describing the debacle in such a way. Your sarcasm was right on considering Mr. Buffett first described derivatives as “Weapons of Mass Descruction” only to use them to cover bets Berkshire made themselves. Talk about “Do as I Say, not as I do”. I’m only surprised that Wall Street puppeteer CNBC even allowed it printed on their website since Mr. Buffett is treated like the savior of mankind. Kudos to you for speaking the truth. YOU GOT MY VOTE!

  85. SRG says:

    Dear Mr Ritholtz ,
    I wanted to thank you for writing the above article and exposing the real culprit in this mess (Our GOVERNMENT).I am not a highly educated man (did not graduate high school),instead i chose to become a licensed structural steel subcontractor in my home state of California (mistake #1).I have run my business successfully for 24 yrs until January of 2009, that is when my construction market started to tank.Being a hard worker i had been through a few of these “recessions” and just told myself 5-8 maybe 10 months it will turn (mistake #2) .How wrong was I !!!. In the last 22 months I have seen the desperation of just common people who really did nothing wrong , lose jobs , cars , homes and family to the atrocious plan of our Government to redistribute personal wealth. I myself just lost my home ( and no it was not a no doc ,ninja loan put 260k down and 200k improvements ) and am in the process of of borrowing from my pension just to try to keep my business going , by the way my pension is charging me 5 .25 pct interest(MY OWN MONEY) ,do you think i could qualify for some govt. loan at .25-.50 pct like they gave the Banks LOL.I really wonder sometimes how the country i grew up in could do this to me after all Ihave done for the last 24 yrs is provide jobs w health benefits and pension , but yet i will be the one holding the bag.Thanx again

    Sincerely

    Steve

  86. DVW says:

    Barry, your ‘Dear Uncle Sucker’ is a brilliant, tour-de-force. You’ve certainly captured the essence of the rage that is being felt by so many. Not easy to do, considering what a complicated, convoluted mess we find ourselves in. I enjoyed it very much. Thanks!

    Doug

  87. PS says:

    I found this article exposes all the problems in our current financial mess. I hope everyone reads this. Great work.

    -Paul

  88. RC says:

    Thank you for taking the time to write this article and to tell the truth!

    -richard

  89. GATO says:

    Dr. Uncle Sucker gets an A+ I will now go buy your book. EOM

  90. Warren Buffett’s Humbug

    If Warren Buffett wants to tarnish his golden years emitting the gushing drivel that appears in today’s New York Times, he has undoubtedly earned the privilege. But even ex cathedra pronouncements by the Oracle of Omaha are not exempt from the test of factual accuracy. Specifically, his claim that “many of our largest industrial companies, dependent upon commercial paper financing that had disappeared, were weeks away from exhausting their cash resources” is unadulterated urban legend. Nothing remotely close to this ever happened.

    The fact is, there was about $2 trillion in commercial paper outstanding on the eve of the Lehman failure. And it’s true that funding of this short-term paper was highly dependent upon money market funds that suffered multi-hundred billion outflows after First Reserve broke the buck owing to its holdings of toxic Lehman paper. So it’s accurate to say that the commercial paper market had seized up and that massive amounts of maturing paper had no ability to roll.

    But those specific facts about the condition of the CP market do not remotely prove that the nation’s great industrial corporations were on the edge of an economic black hole or that Main Street would have experienced crippling waves of defaulted payrolls for lack of cash. Indeed, even a cursory review of the composition of the $2 trillion CP market as of September 2008 shows that the “blowup” was actually about losses on reckless bets by a few thousand money managers, not the availability of ready cash to millions of Main Street businesses.

  91. JML says:

    Sir,

    I very much enjoyed your blog on ‘Dear Uncle Sucker.’ You did not miss a stroke. The most concise yet comprehensive piece on the missteps of the government I have read to date. It should be required reading by all our congressional leaders and I intend to send your piece to my representatives and assure it gets wide email distribution through our Senior Citizens Committee here in Williamsburg.

    Keep up the outstanding work.

    Most sincerely,

    John
    Williamsburg, Va.

  92. jf says:

    Excellent and knowledgeable take!!

  93. [...] Our boy Buffett famously lives in the same tiny house for 25 years. I have long suspected Berkshire bought NetJets so that Warren could fly private without giving up that aww shucks persona. “Hey, I’m not jetting around in a G5, this is due diligence!” [...]

  94. DB says:

    Way to tell the truth. This was class warfare, taking from the US citizenry and keeping the pockets of the elitist Wall Street vermin lined with silk. The cutbacks recently proposed are just more of the same. Mainly cutbacks in entitlement programs. Soon, we’ll be left with nothing except a bag.

    -Derek

  95. JT says:

    Mr. Ritholtz,

    Beautiful response to Warren Buffett’s op-ed. Your commentary was the best I have read all year re: the financial crisis (and I have read too many to count) . Please continue to spread the truth to as many Americans as possible. My only hope is that the American people are competent enough to realize how spot on you are with your message.

    Sincerely,

    -Jonathan

  96. BF says:

    Mr. Ritholtz,

    Love your “what Buffet should have said” article. I’m printing a copy. Concise and spot-on. I also think you are correct whith your article on campaign finance reform. You have a large audience and are one of the most realistic commentators around. Keep up the good work!

    Bev