Warren Buffet and The American Political Class - Things You Probably Did Not Know

A number of months ago we ran a post that talked about the relationship between President Obama and legendary investor Warren Buffet. At that time, Obama was riding high on his class warfare rant about the wealthy in this country not paying enough in taxes and getting public support from Buffet.

We have proven any number of times in this blog that this is a hogwash argument, only meant to divide the country and increase the voting totals for the President this November. We have showed that even if you confiscated EVERY dollar annually earned by millionaire earners in this country or you confiscated the TOTAL wealth (cars, boats, homes, cash, real estate, etc.) of the wealthy in this country, you would never make a substantial dent in the debt problems this nation faces.

What we could not understand at that time is why Buffet was in such support of this asinine position. If we were smart enough to figure out this was only a divisive election year ploy, why wasn't Buffet smart enough to figure it out?

Which is when we hypothesized why this obvious ignorance might be going on. While all of this class warfare was going on, Bank of America was dropping deeper and deeper into dire financial straits. If a major, major bank like Bank Of America was to go under financially, this would have a seriously depressing impact on the whole financial system and the economy, something that any sitting President needs to avoid in a lead up to an election year.

We hypothesized (without any facts or proof, just circumstantial evidence) that Buffet was not being ignorant and a patsy of the President, he was just  being a good business person. Our hypothesis went as follows:

- Bank Of America needed an infusion of capital to remain solvent.
- Obama needed the bank to stay solvent and help in dividing the country along class lines for his reelection.
- Buffet likes to make loads of money.
- We concluded the conspiracy went as follows:

• Obama asked Buffet to support his tax-the-rich strategy in return for arranging great terms and conditions for Buffet throwing some of his money to Bank Of America.
• Bank Of America received the infusion of cash and gave Buffet incredible terms, both short term and long term, from an interest and stock option perspective.
• Buffet returned the favor to Obama by supporting his nonsensical tax-the-rich rhetoric.
• Bank Of America at least temporarily avoided bankruptcy, helping keep the economy from taking a nose dive in an election year.

While it all made sense and all happened at around the same time, there is no media proof or other proof that this actually happened. It might have all been a coincidence. However, if you read a fascinating article by Peter Schweizer, "Warren Buffet: Baptist and Bootlegger," that appeared in the March, 20120 issue of Reason magazine, our conspiracy theory is looking a lot better. [Please note: the details of our Bank Of America theory can be found at the following address]:

http://loathemygovernment.blogspot.com/search?q=%22bank+of+america%22

It seems that this is not the first time that Mr. Buffet played the political class for his own company's benefit. He has been all over Washington for the past few years, not for the benefit of the country, but for the benefit of his company, Berkshire Hathaway. Without going into a long, detailed description of the exploits of Mr. Buffet Goes to Washington that Mr. Schweizer provides in the article, consider the following highlights:

• Mr. Schweizer correctly describes Mr. Buffet as much as a"political entrepreneur" as a "business entrepreneur"
• He points out how Mr. Buffet, through Berkshire Hathaway, "has used taxpayer money as a vehicle to even greater profits and wealth" and that "the profitability of some of his largest investments rely on government largess and coddling with taxpayer money."
• At the height of the financial crisis in 2008, Buffet invested $5 billion in Goldman Sachs who needed the cash since it was not only short of cash but over leveraged in its investments. For his investment, Buffet received incredible terms including preferred stock with a whopping 10% yield and an attractive option to buy another $5 billion shares.
• However, he only did this because he expected the Federal government and Federal political class to bail out the banks: "If I didn't think the government was going to act [with taxpayer money], I wouldn't be doing anything this week."
• Buffet also had large financial stakes in other banks including Wells Fargo and U.S. Bancorp so he really needed the Federal government and political class to get a bank bailout plan implemented.
• To help that plan come to fruition, Schweizer points out Buffet went to work in Washington to ensure that the bank bailout program, TARP, actually got implemented by our politicians.
• The first bill to implement a bank bailout program was defeated in Congress but.......
• Many sitting Congressional people had large personal investments in Buffet's company: 1) Senator Bill Nelson held between $1 and $6 million of Berkshire stock, 2) Senator Dick Durbin bought Berkshire stock four times in just a three week period in late 2008, during the bailout debate in Congress, during the vote on the bailout and after the bailout vote, 3) Senator Claire McCaskill bought $500,000 worth of Berkshire stock just days after the bailout was approved, and 4) Senator Orrin Hatch also bought the stock during this time period.
• But it gets even better: following Buffet's investment in Goldman Sachs, Congressman John Boehner, Congressman Vern Buchanan, and Senator Jeff Bingaman also bought Goldman stock during this period.
• Senator Barack Obama was an early non-supporter of the bailout but over time he also became a supporter, probably with the support of Buffet since according to Schweizer, "Buffet struck a posture of cheering on the bailout from the sidelines" and more incredibly, he actually "participated in a conference call with House Speaker Nancy Pelosi and other House Democrats during which he pushed them to passed the [bailout] bill."
• Schweizer claims that without the bailout bill, it would be a financial disaster for the Berkshire investments in Goldman and other banks; with the bill he would receive a financial windfall.
• All told, financial companies that Buffet had major financial stakes in received $95 billion in TARP money while many banks, without Buffet's Washington connections received no bailout money, at least according to Robert Wilmers, chairman of M&T Bank: "The pattern is clear: the bailout money and the perks are concentrated among the big banks, the ones who pay the lobbyists and make the campaign contributions, while the healthy banks pay the freight."
• It was critical that Buffet's bank investments receive help since, according to the article, 30% of Berkshire's total wealth was tied up in the banking industry. The Houston Chronicle carried an investigative article in April, 2009 which concluded that Berkshire was one of the biggest beneficiaries of the banking bailout.
• Schweizer concludes that if Goldman had not received the bailout money, Berkshire would have taken a major hit on that investment rather than reaping $2.5 billion in profit on just the Goldman investment.
• But banks are not the only area where Buffet and Berkshire intersect with Washington. The article reviews how Buffet's purchase of Burlington Northern Santa Fe (BNSF) Railroad and its  footprint of railroad tracks physically overlaps very nicely with his friend's/Barack Obama's  pipe dream of a high speed rail network.
• Relative to Obama's $800 billion economic stimulus program, if you go to the program's website which tracks stimulus grants and loans and search on "BNSF,"  you get about 1,800 entries returned. Dig deeper into the search results and you find that Buffet interests received tens of millions of stimulus dollars, if not more, from a wide variety of Federal departments including Homeland Security and the EPA.
• And finally, after Buffet and his companies made billions of dollars off of taxpayer wealth in a wide variety of ways, he graciously decided to host a reelection fund raiser for Obama in August, 2011 at the cost of $35,000 for each attendee. Obviously, it was the least he could do.

Thus, the next time you see a joint appearance by Warren Buffet and Barack Obama, think about their joint history, a portion of which is listed above.  Don't pay much attention to what they say but focus on what Mr. Buffet is getting out of the appearance. That will help put everything in perspective because if Buffet's behavior proves anything from the past few years, he is in it for the money, even if it is yours, mine, and every other taxpayer's money in the country.

As Mr. Schweizer concludes in his last paragraph: "Warren Buffet is a financial genius. But even better for his portfolio, though worse for the rest of us, he is a political genius.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:


http://www.unitedstatesofpurple.com/


The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.


The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

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http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

The Obama/Buffet Relationship: Conspiracy or Coincidence?

The following is strictly hypothetical. It is not based on any hard core evidence or findings or investigations. It is strictly conjecture.
But it is logical conjecture, based on the coming together of a large set of circumstances. These circumstances could be strictly coincidental or just another instance of Obama administration cronyism and political maneuvering for political gain, not the best interests of the nation.

Let's start with Warren Buffet. We know that over the past month or so, he has come out strongly in support of President Obama's unhealthy and irrational fixation with increasing the tax burden of the wealthy in this country, claiming that on a percentage basis, he pays less in Federal income taxes than members of his staff.

This obviously has added some degree of credibility to the President's call for higher taxes in the midst of a recession with some voters. Never mind that this is a lame economic policy to pursue while on the brink of another recession and even if implemented, it would have an infinitesimally small impact on the nation's financial situation.

Also, within the past month, late August, Warren Buffet announced that his company would invest $5 billion in Bank Of America. There was universal consensus in the press that this was a sweet financial deal for Buffet, given the terms of the deal, as highlighted in a New York Times article on August 25, 2011:

• Buffet's company, Berkshire Hathaway, will get special preferred stock for its $5 billion investment.
• This special stock will pay a guaranteed annual 6% dividend, a great/impossible return in these difficult economic times for most individual Americans and companies.
• This 6% is guaranteed forever, until Bank Of America goes out of business, or until Bank of America decides to buy back the shares at a 5% premium.
• If Bank Of America does go out of business, Buffet's company would be first in line in any bankruptcy proceedings, ahead of all other creditors, in retrieving part of its investment back.
• Berkshire Hathaway also received warrants for 700 million common shares of Bank Of America stock at  $7.14 per share, good for the next ten years. I believe this means that anytime in the next ten years, Buffet's company can buy up to 700 million common shares of Bank of America for $7.14 even if the market price of the price of these common shares are substantially higher. For example, if the stock price is $14.14 in two years, Buffet can buy 700 million shares at only $7.14 and instantly be almost $5 billion ahead on his investment, exclusive of the 6% annual dividend.
• In fact, an online article from a local Charlotte, North Carolina business journal, the hometown of Bank Of America, estimated that if Bank of America stayed in business for three years and attained a stock price level that it had as recently as 2010, then Buffet's $5 billion investment would grow to $9.9 billion in three years. This comes out to an annualized return of just over 25%, not too bad in these dire economic times.

Obviously a sweetheart deal for Buffet's Berkshire Hathaway company.

But why would Bank Of America do such a deal? Probably because Bank of America is not doing well financially, again as reported in the New York Times article cited above and other news sources:

• Bank Of America's common stock price was down over 30% just in the month before this deal was done, is down more than 50% in 2010, and down almost two thirds since 2010.
• The bank is under intense investigations over its foreclosure practices.
• Its mortgage division has run up billions of dollars in legal fees and defaults on all mortgages are not expected to let up anytime soon.
• The whole mortgage mess was the main reason behind the bank's $8.8 billion loss in its financials in the second quarter of this year.
• The financial losses have caused bank management to focus on selling assets such as some of its international credit card divisions and to downsizing its workforce, including 3,500 job cuts it announced in late August.

This is obviously a company under duress. However, an investment from an investor as widely respected and followed as Buffet adds a tremendous amount of credibility to Bank Of America's public assertions that it is moving in the right direction and that it will survive as a viable financial institution going forward. Short term, the strategy seemed to work in late August as the stock price initially jumped 25% and then settled down to an 8% increase. This move also juiced other financial stocks.

Thus, in the short term, Bank Of America got a positive jolt of confidence and share price increase by Buffet's investment.

Now, where does Obama fit in? Obviously, the only thing that this President is currently focused on is how to get himself re-elected in November, 2012, the rest of the nation's problems be damned. Imagine what would happen if Bank of America continued to free fall financially, so much so that its collapse was imminent:

• As the largest, or one of the largest banks in the nation, and world, depending on how you measure, a collapse of Bank Of America would have catastrophic economic implications, no doubt throwing the country and the world into another deep recession.
• Its collapse would bring into doubt the viability and stability of all financial institutions.
• This situation would surely freeze up credit markets, making business expansion and growth next to impossible.
• No business expansion means stagnant or deteriorating unemployment rates and increasing mortgage defaults.
• The effectiveness of one of Obama's big legislative victories, the Dodd-Franks financial reform law, would be called into doubt if such a catastrophic bank crisis could arise within a year or so of the legislation being passed.
• Citizens, and voters, would have no appetite for another round of bank bailouts even though too big to fail has become even a bigger problem under Obama's watch.

In other words, the economy would be imploding just months before the Presidential elections, certainly dooming his overarching need to get re-elected.

Thus, is it all coincidental or is it, in fact, all related? From a conspiracy perspective, was there a mutual beneficial society troika (troika - any group of three persons, nations, etc., acting equally in unison to exert influence, control, or the like) formed between Buffet-Obama-Bank Of America:

• Obama has to prevent Bank of America from going under at all costs from an election year perspective.
• He calls Bank of America's leaders and says he can get them both a cash infusion and a credibility infusion but it has to be made worthwhile, financially, for that investor to come forward.
• He then calls Warren Buffet up and says he can get Buffet a sweetheart deal down at Bank Of America, a deal that would guarantee a sweet annual rate of return, would hold the promise to make billions more, and would minimize his downsize risk by moving Buffet's company to the head of the line of creditors in case of a bank default.
• In return for some easy, low risk money, Buffet needs to do a little politicking for the President's irrational "tax the rich more" platform and maybe host a few re-election fund raising dinners with Buffet's rich friends.
• Everybody involved in the troika is a winner. Buffet gets a great financial deal, Bank of America gets at least some temporary relief, financially and confidence wise, and the President averts an economic disaster and gets some PR help on his tax plan.

Just a conspiracy theory but not a far fetched conspiracy theory, based on the Obama administration's past relationships with other corporations to further the President's personal political needs at the expense of the taxpayer:

- Most people should be familiar with the disaster that is Solyndra, the California solar panel company that went out of business and took over half a billion dollars of taxpayer money with it. This money came out of the President's economic stimulus program, a program that legally required the U.S. taxpayer be first in line to recover assets and money if a company which received stimulus funds went out of business.

However, it now appears that the Obama administration moved a private investor in Solyndra ahead of the U.S. taxpayer in bankruptcy arrangements. This private investor has been a big contributor and fund raiser for Obama in the past. Conspiracy or coincidence?

- LightSquared is a communications company that wants to build out a satellite wireless communications system. However, there is concern that its technology will have a severe interference impact on civilian and military GPS signals. Thus, Congress scheduled hearings to determine if this was the case and whether the LightSquared effort should be blocked.

A Pentagon general was set to testify in front of a Congressional committee and was to testify that yes, indeed, LightSquared's technology would interfere with Defense Department communications. However, it is alleged, and the General testified to the fact, that the White House tried to get the General to falsely testify that military communications would not be impaired. Turns out that the owner of LightSquared was also a big donator and fund raiser of President Obama's past elections efforts. Conspiracy or conincidence?

- According to a September 23, 2011 article from Politico, in early October, Tom Carnahan will host a $25,000 per person fundraiser for the President's re-election campaign. The Carnahan family has long been a Democratic Party power in the state of Missouri. The article also explains that Carnahan is the owner of an energy development firm, Wind Capital Group, which has received a $107 million Federal tax credit from the Obama administration to develop a wind power facility in Missouri.

Even if no quid pro quo was involved, the appearance of conflict of interest is just as bad as an actual conflict of interest. It just smells bad that someone who gets free Federal tax treatment turns around to host fund raisers for the administration that granted the tax credit. Just a smelly affair. Conspiracy or coincidence, or in this case, a severe conflict of interest?

- And finally, our favorite conspiracy or coincidence company, General Electric. Jeffery Immelt, the Chairman of General Electric always seems to be with the President. He is the chairman of the President's economic council and gives the President credibility that he is a friend of business. Immelt has been a big fund raiser and contributor to previous Obama campaigns.

However, General Electric gets benefits also. The President has not moved to change the tax laws that specifically benefit GE, which allowed the company to generate billions in profits, pay no Federal income taxes, and receive a multi-billion dollar Federal income tax credit in 2010. When GE received TARP funds a few years ago, the program that was supposed to bail out financial firms, GE executives did not have to abide by executive pay restrictions like all other TARP recipient firms.

If it has not already, it would not be a surprise of GE's wind turbine division received some kind of favorable tax treatment, to the American taxpayer's detriment, from the Obama administration in the future. Conspiracy or coincidence?

Even if there are no conspiracies involved, the whole situation just smells. The relationship between politicians, elections, and Federal taxpayer money is way too entangled to avoid even the appearance of conflict of interest.

That is why Step 1, Step 6 and Step 39 from "Love My Country" are so important. Step 1 would reduce Federal government spending by 10% a year for five years. This would reduce our debilitating national debt and reduce the amount of money floating around that politicians can misdirect to their favorite re-election supporters, at the expense of ordinary taxpayers.

Step 6 would prohibit anyone or any organization from contributing to an election campaign unless it was an individual American. No more corporations, PACs, or unions contributing to politicians' campaigns in hope of getting taxpayer wealth, in whatever form possible, in return.

Step 39 would impose term limits on all Federal politicians. Most of these shenanigans occur when a politician wants to get re-elected. By restricting them to one term and on term only, much of the conspiracy, coincidence, and conflicts of interest would disappear, helping to purify the original intend of our election system.

Conspiracy or coincidence? It would make for a good political thriller but it makes for a lousy way to run a country and a government.



Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available, at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.


Please visit the following sites for freedom:
http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com/