http://www.nytimes.com/2010/11/17/op...ess&emc=dlbka9

Pretty Good for Government Work

By WARREN E. BUFFETT
Published: November 16, 2010

DEAR Uncle Sam,

My mother told me to send thank-you notes promptly. I’ve been remiss.

Let me remind you why I’m writing. Just over two years ago, in September 2008, our country faced an economic meltdown. Fannie Mae and Freddie Mac, the pillars that supported our mortgage system, had been forced into conservatorship. Several of our largest commercial banks were teetering. One of Wall Street’s giant investment banks had gone bankrupt, and the remaining three were poised to follow. A.I.G., the world’s most famous insurer, was at death’s door.

Many of our largest industrial companies, dependent on commercial paper financing that had disappeared, were weeks away from exhausting their cash resources. Indeed, all of corporate America’s dominoes were lined up, ready to topple at lightning speed. My own company, Berkshire Hathaway, might have been the last to fall, but that distinction provided little solace.

Nor was it just business that was in peril: 300 million Americans were in the domino line as well. Just days before, the jobs, income, 401(k)’s and money-market funds of these citizens had seemed secure. Then, virtually overnight, everything began to turn into pumpkins and mice. There was no hiding place. A destructive economic force unlike any seen for generations had been unleashed.

Only one counterforce was available, and that was you, Uncle Sam. Yes, you are often clumsy, even inept. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction. And when our citizens are losing trust by the hour in institutions they once revered, only you can restore calm.

When the crisis struck, I felt you would understand the role you had to play. But you’ve never been known for speed, and in a meltdown minutes matter. I worried whether the barrage of shattering surprises would disorient you. You would have to improvise solutions on the run, stretch legal boundaries and avoid slowdowns, like Congressional hearings and studies. You would also need to get turf-conscious departments to work together in mounting your counterattack. The challenge was huge, and many people thought you were not up to it.

Well, Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic — and, overall, your actions were remarkably effective.

I don’t know precisely how you orchestrated these. But I did have a pretty good seat as events unfolded, and I would like to commend a few of your troops. In the darkest of days, Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch. And though I never voted for George W. Bush, I give him great credit for leading, even as Congress postured and squabbled.

You have been criticized, Uncle Sam, for some of the earlier decisions that got us in this mess — most prominently, for not battling the rot building up in the housing market. But then few of your critics saw matters clearly either. In truth, almost all of the country became possessed by the idea that home prices could never fall significantly.

That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles. And when bubbles pop, they can generate waves of trouble that hit shores far from their origin. This bubble was a doozy and its pop was felt around the world.

So, again, Uncle Sam, thanks to you and your aides. Often you are wasteful, and sometimes you are bullying. On occasion, you are downright maddening. But in this extraordinary emergency, you came through — and the world would look far different now if you had not.

Your grateful nephew,
Warren

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I think Warren Buffet had some pretty big investments in firms like Wells Fargo etc etc. Which means that gvt did save him a pretty big penny. But overall, it's still nice to see someone capable of saying thanks!

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Berkshire subsidiary Clayton Homes sells homes to people, typically with a lowish credit score, manyy of them sub-prime. In his letter to shareholders for 2008 Buffett noted (page 10-11):

Clayton is the largest company in the manufactured home industry, delivering 27,499 units last year.
This came to about 34% of the industry’s 81,889 total. Our share will likely grow in 2009, partly because much
of the rest of the industry is in acute distress. Industrywide, units sold have steadily declined since they hit a peak
of 372,843 in 1998.
At that time, much of the industry employed sales practices that were atrocious. Writing about the
period somewhat later, I described it as involving “borrowers who shouldn’t have borrowed being financed by
lenders who shouldn’t have lent.”
To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was
involved. (“That certainly looks like a $2,000 cat to me” says the salesman who will receive a $3,000
commission if the loan goes through.) Moreover, impossible-to-meet monthly payments were being agreed to by
borrowers who signed up because they had nothing to lose. The resulting mortgages were usually packaged
(“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and
it did.
Clayton, it should be emphasized, followed far more sensible practices in its own lending throughout
that time. Indeed, no purchaser of the mortgages it originated and then securitized has ever lost a dime of
principal or interest. But Clayton was the exception; industry losses were staggering. And the hangover continues
to this day.
This 1997-2000 fiasco should have served as a canary-in-the-coal-mine warning for the far-larger
conventional housing market. But investors, government and rating agencies learned exactly nothing from the
manufactured-home debacle. Instead, in an eerie rerun of that disaster, the same mistakes were repeated with
conventional homes in the 2004-07 period: Lenders happily made loans that borrowers couldn’t repay out of their
incomes, and borrowers just as happily signed up to meet those payments. Both parties counted on “house-price
appreciation” to make this otherwise impossible arrangement work. It was Scarlett O’Hara all over again: “I’ll
think about it tomorrow.” The consequences of this behavior are now reverberating through every corner of our
economy.
Clayton’s 198,888 borrowers, however, have continued to pay normally throughout the housing crash,
handing us no unexpected losses. This is not because these borrowers are unusually creditworthy, a point proved
by FICO scores (a standard measure of credit risk). Their median FICO score is 644, compared to a national
median of 723, and about 35% are below 620, the segment usually designated “sub-prime.” Many disastrous
pools of mortgages on conventional homes are populated by borrowers with far better credit, as measured by
FICO scores.
Yet at yearend, our delinquency rate on loans we have originated was 3.6%, up only modestly from
2.9% in 2006 and 2.9% in 2004. (In addition to our originated loans, we’ve also bought bulk portfolios of various
types from other financial institutions.) Clayton’s foreclosures during 2008 were 3.0% of originated loans
compared to 3.8% in 2006 and 5.3% in 2004.
Why are our borrowers – characteristically people with modest incomes and far-from-great credit
scores – performing so well? The answer is elementary, going right back to Lending 101. Our borrowers simply
looked at how full-bore mortgage payments would compare with their actual – not hoped-for – income and then
decided whether they could live with that commitment. Simply put, they took out a mortgage with the intention
of paying it off, whatever the course of home prices.
Just as important is what our borrowers did not do. They did not count on making their loan payments
by means of refinancing. They did not sign up for “teaser” rates that upon reset were outsized relative to their
income. And they did not assume that they could always sell their home at a profit if their mortgage payments
became onerous. Jimmy Stewart would have loved these folks.
Of course, a number of our borrowers will run into trouble. They generally have no more than minor
savings to tide them over if adversity hits. The major cause of delinquency or foreclosure is the loss of a job, but
death, divorce and medical expenses all cause problems. If unemployment rates rise – as they surely will in
2009 – more of Clayton’s borrowers will have troubles, and we will have larger, though still manageable, losses.
But our problems will not be driven to any extent by the trend of home prices.

If anyone should be resentful about all the money that went into bailing out Wall Street, you'd think it would be Buffett - except that he understood the systemic risk and the necessity for the government to step in. But I suppose that won't stop Glenn Beck and the Tea Partiers from carrying on about it.

So you're right that Warren Buffet does understand systematic risks etc. He recently said that he is spending a heck of a lot more time looking at the macro picture than he used to. Because, in systematic castrophes, weel run good businesses get damaged too.

But I was pointing out that Warren wasn't exactly entirely upfront - He did benefit significantly from the bailout too. I'll see if I can dig the article where his involvement with Wells Fargo and a couple of other financials are mentioned.

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Unless otherwise specified, I am posting as a regular poster. When I will act as a mod, I'll make sure you're in no doubt.

Saying thanks? Or being an asshole and rubbing everyone elses faces in it?

And its not like, IMO, he did anything remarkable for it either, just made the right connections in government and hung around long enough to collect on it when the shit hit the fan.

He should be writing a thank-you letter to whichever one of his aunts fucked Uncle Sam for him.

~2cents

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Righteousness will always be the trap at the gates of hell