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Old 10-03-2008, 08:02 PM
 
2,197 posts, read 7,034,286 times
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I don’t understand why we had to pass this nonsensical porked-up bailout bill when there are other options… simpler options that are less risky, less burdensome and actually make economic sense. Why didn’t we just do what Warren Buffett did with Goldman and GE? The banks need capital, so instead of assuming unwanted portfolios of toxic loans, why not have the banks issue a senior preferred note that carries a higher rate of interest commensurate with the higher risk? If a bank can’t make it, it files a bk and the government has first right to marketable assets; if the banks are able to deleverage down the road or can arrange more advantageous financing elsewhere, the note is called.

Of course, people have chastised Buffet, calling him opportunistic and a profiteer. Um, yeah. What’s he supposed to be—Santa Claus? No, he’s a savvy businessperson, looking for a win-win. He gives Goldman and GE an $8 billion cash infusion, which they need, and he makes money on the deal while minimizing his risks.

So why didn’t we do the same? Why didn’t the government put our money to work instead of giving it away? The banks stay in business, the government makes money and the taxpayers are off the hook. It's called capitalism, and once upon a time we built this country on it. Maybe we could even do it again.

Or the taxpayers can just be Santa Claus.
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Old 10-03-2008, 08:26 PM
 
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Is GE hurting because of this as well, or where they just always hurting?
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Old 10-04-2008, 07:57 AM
 
Location: LEAVING CD
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Quote:
Originally Posted by NJ Chutzpah View Post
Is GE hurting because of this as well, or where they just always hurting?
Because of the GE Capital part of the corp they were starting to drown in bad debt from what I've read...
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Old 10-04-2008, 08:39 AM
 
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Yes, the rising cost of insuring debt for their Capital Services arm threatened to cause a short-term funding squeeze. I believe it was a proactive move to keep GE well-funded in case credit markets locked up. Seems like a win-win to me, and I don't understand why the government didn't try these types of solutions before passing that huge bailout bill that few economists, politicians or Americans think will work.
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Old 10-05-2008, 07:35 AM
 
706 posts, read 1,226,161 times
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Buffett has been complaining for 2 years that Berkshire has too much cash and nowhere to put it to work.

$5 billion to Goldman @ 10% coupon = $500 million annual interest
$3 billion to GE @ 10% coupon = $300 million annual interest
Pretty sweet deal for Berkshire.

The bigger question is why are GE and GS borrowing money @10% ?
Probably tells you how bad the credit market are/will be in the near future.
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Old 10-05-2008, 08:31 AM
 
2,197 posts, read 7,034,286 times
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Real sweet deal, in this economic climate. I don't know why the govt couldn't have done the same.

I'm thinking about buying Berkshire stock in my IRA. It will be interesting to see how the market responds next week. We didn't get a relief rally Friday and the trend line is down, so it may take dropping rates to get that last vitamin shot for a short-term rally.
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