Jesse at Jesse's Cafe Americain has a 24 September 2008 post referring to Richard Whitney (RW), replete with 1929 newspaper headlines worth reading. Jesse likens RW's 1929 actions to the current Paulson plan. I have a different take. Here's a link: http://jessescrossroadscafe.blogspot.com/2008/09/bens-policy-errors-bankers-rescue-in.html.
"For six months, as the credit crisis deepened, billionaire investor Warren Buffett turned away a string of Wall Street firms that came hat in hand looking for help. ... Tell us what kind of investment you'd consider making in Goldman, the banker urged him, and the firm would try to hammer out a deal. ... The swiftness of the deal underscores the intense pressure now faced by Goldman, long regarded as one of the most financially secure firms on Wall Street. ... Buffett's decision to invest now in Goldman gives an indication of how the famed investor believed the financial crisis might shake out. ... In a telephone interview Wednesday morning from his office in Omaha, Mr. Buffett said he believes the proposed federal bailout will be approved by Congress and that it will succeed. ... If Congress fails to approve the bailout, Mr. Buffett says, all bets are off. His investment in Goldman will 'get killed, and so will all our other investments' ... His holding company, Berkshire Hathaway, had often used Goldman as an investment banker on deals. His reputation, both for smart investing and solid ethics, would likely give investors the reassurance they needed, the executives reasoned", Susan Pulliam, Kate Kelly and Matthew Karnitshnig (PK&K) at the WSJ, 25 September 2008.
"Billionaire Warren Buffett, calling turmoil in the markets an 'economic Pearl Harbor,' said his $5 billion investment in [GSG] is an endorsement of the Treasury's $700 billion bank rescue plan. 'I am betting on the Congress doing the right thing for the American public and passing this bill,' Buffett said. ... 'I think the Treasury will pay back the $700 billion and make a considerable amount of money,' Buffett said", Erik Holm at the Houston Chronicle, 25 September 2008.
"In the latest unexpected deal stemming from the financial crisis, General Electric Co. turned to Warren Buffett to inject at least $3 billion in the company--and, GE hopes, provide a much-needed boost in investor confidence. ... The deal is vintage Buffett: buying into a blue-chip company on favorable terms when its shares are depressed. ... GE's immediate problems are rooted in its finance unit, which propelled much of the conglomerate's growth for the past 25 years. ... The GE deal again highlights the troubles of companies that rely on short-term funding when investors have become skittish about all but the safest investments. GE Capital has assets of $695 billion, more than many banks though at lower leverage. It lends money to businesses such as restaurant franchisees, and finances the loans by borrowing for short periods at low rates and lending at higher rates for longer periods. The company acts like a bank, but it can't borrow from the [Fed]. ... GE also said it would curb long- and short-term borrowing at the finance unit, suspending plans to sell $10 billion in long-term debt in the fourth quarter", Paul Glader and Liz Rappaport at the WSJ, 2 October 2008.
Jesse previously asked, "Or did Warren just decide to get a place at the table with the new ruling power in the US", 23 September 2008.
Warren Whitney? Confidence in GSG? Lloyd Blankfein smart? Of course, AB and JD Harvard. He must be smart. Look at consitutional scholar Obama, JD Harvard. Law Review to boot! Whitney? Who?
I do not know why Buffett does anything. But I think a man who gave away $31 billion is not interested in making more money. Could Buffett be today's RW? Jesse's question is worth pondering. Consider Buffett's position on estate taxes. No matter what Buffett was or wasn't in the past, I conclude he is a socialist now. If Berkshire spent $5 billion to ensure Buffett's place at the Wall Steet table, I view it as Buffett's "consumption expenditure". He has lived in the same house since 1968. Jesse also wrote, "Goldman is paying Warren a pretty rich return for his buy-in". If GSG used Buffett deal for "signalling" thinking it would push Paulson's plan over the top, the $5 billion in question is peanuts.
GSG rents Buffett's name to lend credibility to Paulson's bailout plan. Wonderful. GSGs action shows how little credibility it and its "former" executive Paulson have. The title of this article was: "Buffett Drove Hard Bargain With Goldman". I wish the WSJ would stop editorializing on its newspages.
Buffett is entitled to express his opinion. However, the markets do not share it. Neither do I. His GSG 'investment" is a political statement, not an investment as I understand the term.
What's Buffett doing? Just what RW did in going from post to post on the NYSE in 1929. Imagine, he even bought into GE, just like RW! History does repeat. Not "unexpected" by me. This time, the crash will not be in the stock market, oh no. The bond market. Full disclosure: I have never liked GE, considering it to be an incompetently managed bank with an egomainiac CEO. These clowns didn't even match maturities. What was GE, a poorly managed S&L of 25 years ago? See also my posts on GE's Joe Jett fiasco.