Well, I am very glad to see that Mish is thinking the same and is very vocal about it. In a post he wrote today, titled Buffett Defends the Indefensible: Goldman Sachs and Rating Agencies; Goldman's Sweetheart Deal With Buffett Revisited, he said:
In the midst of the stock market crash, Warren Buffett got a great deal on Goldman Sachs preferreds. Those preferreds are making him $15 a second.
I do not fault Buffett one second for taking that deal. It seemed like a great deal at the time, and it was. The problem is, it's important to distinguish between a deal good for his shareholders, and the integrity of Goldman Sachs.
Sadly, Warren Buffett is now caught in no man's land, unable or unwilling to see the difference.[...]
"We love the investment," Buffett said. "Our preferreds are paying $15 a second, so as we sit here, 'Tick, tick, tick, tick,' that's $15 every second," he said.
Buffett added that the SEC lawsuit was not a serious enough event to raise reputational issues that would call into question the Berkshire investment.
That last sentence is complete nonsense at best. At worst it is a blatant lie.
Buffett voluntarily put himself in the position of having his integrity questioned. He could have said "we got a great deal" and left it at that. It would have been a true statement.
However, it's hard not to defend someone who give you a sweetheart deal that makes $15 a second.
I agree with Buffett that Moody's, Fitch, and the S&P have an "incredibly wonderful businesses" in the same sense the Mafia has an "incredibly wonderful businesses" with its numbers racket.
At least with the Mafia, you know what the odds are, and profits are paid in cash.
With the rating agencies we saw blatant incompetence and fraud every step of the way. What makes that a 'Phenomenal' Business Model is explicit government sanction.
Once again, I do not fault Buffet for spotting an "incredibly wonderful businesses" whose "pricing power is significant." I can and do fault Buffett for his defense of pervasive rating agency fraud, shrugging it off as a mistake.
Here are a sample of my posts about Warren Buffet:
- 2010-05-02 Buffett says Ratings Companies Still Have 'Phenomenal' Business Model
- 2008-10-24 Losing My Integrity - Warren Buffet's Next Book?
Clck here for all my posts about Warren Buffet.