?

Log in

Previous Entry | Next Entry

Perversity

From Warren Buffet's recent Berkshire Hathaway shareholder letter:
 
[Berkshire]’s lending operation, though not damaged by the performance of its borrowers, is nevertheless
threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee --
banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and
others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella -- have
money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing
borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the
government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.
This unprecedented spread in the cost of money makes it unprofitable for any lender who doesn’t
enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the
"haves" and "have-nots." That is why companies are rushing to convert to bank holding companies, not a course
feasible for Berkshire.
Though Berkshire’s credit is pristine -- we are one of only seven AAA corporations in the country -- our
cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the
moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

I can think of no better word than perversity, in the economic sense, for the above described Government policies.  This is just one more example that the Government does not and cannot manage the economy other than to the detriment of individuals and business entrepreneurs.



Comments

( 2 comments — Leave a comment )
writerspleasure
Mar. 2nd, 2009 05:25 pm (UTC)
disgusting.
jwhend49
Mar. 2nd, 2009 05:33 pm (UTC)
Absolutely!
( 2 comments — Leave a comment )

Latest Month

April 2016
S M T W T F S
     12
3456789
10111213141516
17181920212223
24252627282930

Tags

Powered by LiveJournal.com
Designed by Tiffany Chow