Friday, August 22, 2008

Warren Buffett gets real about the government

Buffett is well known about his complaints that he pays less tax than his secretary. Well, Warren, when you are the richest man on earth, you might have more access to institutions--who will shelter your income and wealth from taxes--than the rest of us.

But in the case of Fannie & Freddie, Buffett is spot on:
Fannie Mae and Freddie Mac, the two largest mortgage finance companies, ``don't have any net worth,'' billionaire investor Warren Buffett said.

``The game is over,'' Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., said in an interview on CNBC today. ``They were able to borrow without any of the normal restraints. They had a blank check from the federal government.''

Freddie Mac and Fannie Mae touched 20-year lows yesterday on the New York Stock Exchange on speculation a government bailout will leave the stocks worthless. U.S. Treasury Secretary Henry Paulson won approval from Congress last month to pump emergency capital into the companies, which account for more than half of the $12 trillion U.S. mortgage market.

Mr. Buffett, I hope you continue to follow the logic of your observations: a smaller government will yield smaller government disasters.

Here is some more history on the government's creation of the GSE mess.

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