When Warren Buffet put $5 billion in Berkshire Hathaway funds into Goldman Sachs the week after Lehman failed, amidst total turmoil and panic, it appeared from the outside a high risk bet. Buffet had long tried to portray himself as a folksy engine of traditional stability, investing only in things he could understand, so jumping into a wholesale run of chained liabilities may have seemed more than slightly out of character. Some of that was explained later via Buffet’s apparent hands on TARP, particularly version 1, but also later investments in Wells Fargo and US Bancorp.
I have no particular issue with Buffet making those investments, only the pretense of intentional mysticism that surrounds them. The reason the criticism of crony-capitalism sticks is because this was not Buffet’s first intervention to “save” a famed institution on Wall Street. If Buffet’s convention is to stick with “things you know” then he has been right there through the whole of the full-scale wholesale/eurodollar revolution.
On August 21, 1991, Calpers announced that it was cutting ties with Salomon Brothers, explicit in its condemnation, saying it was “outraged and disappointed” that the investment house would knowingly try to circumvent securities rules. There was a Congressional investigation and SEC threats, even criminal beyond the typical slappish fines that are used now. It was so outrageous that even Treasury Secretary Nicholas Brady, purportedly with Alan Greenspan on board, considered yanking Salomon’s primary dealer privilege – which would have meant the end of Salomon right then and there.
With almost a quarter century having passed, Solly, as the firm used to be known, has faded from memory in its more detailed contributions. It was the Wall Street firm that epitomized the 1980’s far more than any others, being famously written up in Michael Lewis’ Liar’s Poker and Tom Wolfe’s The
Originally appeared at: http://davidstockmanscontracorner.com/59763/