Berkshire to Pay Nothing to Be Among Top Goldman Sachs Holders

People who don't know any better believe that Warren Buffett is just a smart stock picker. Nothing could be further from the truth. He's very good at making deals that would make a loan shark blush if the loan shark was worth $50 billion.

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) is poised to become one of Goldman Sachs Group Inc. (GS)’s largest shareholders without paying anything after the companies agreed on a plan to settle warrants granted at the height of the 2008 financial crisis.

Hey Kids, Guess Who’s Protecting The Evil Corporate Jets?

Democrats: the Party of the Rich.

 

Did you know that Democrat and mega billionaire Obama supporter Warren Buffet owns Net Jets, the largest private jet fleet in the world with more than 650 aircraft worldwide. It is also being dunned for hundreds of millions in taxes it has not paid.

Listening to the White House, you might think that the “balanced” Democratic plan to avert the spending cuts would close that loophole for private jets.

But you would be wrong.

The Senate Democratic plan – which has been endorsed by the White House and is, in fact, the only Democratic plan actively under consideration right now – doesn’t touch corporate jets.

 

Once you follow the money trail you understand why Buffett and Obama support each other.

Obama Backers Duck Obama Taxes

Guess who’s looking to avoid Obama’s “patriotic” tax increases: The Washington Post and Warren Buffett!

It appears that the Washington Post intends to pay all of its projected 2013 dividends in 2012. Corporations typically pay dividends one every quarter but that is simply a custom, not a law. So the Washington Post company plans to pay all four of the dividends it planned to pay in 2013 in December 2012. Why? Well, in 2012 the tax on dividends is 15%. In 2013 the rate can go as high as 43.4%.

And guess who the largest shareholder in the Washington Post company is. Right, you Mensa member you, it’s Warren Buffett with 1.7 million shares. That means that Warren “I’m not being taxed enough” Buffett is going to collect $17 million this year on which he pays less than half of what his patriotic share would be.

Do you think that a discreet phone call was made to the Washington Post by its largest shareholder who wanted to avoid paying his “fair” share? Why so cynical? Don’t you believe in coincidences? 

I don’t want to call this “crony capitalism” or part of the culture of corruption, but the next time Warren Buffett opens his fat trap about not paying enough in taxes, I want to shove this down his throat. Buffett has built his entire empire around tax avoidance. Berkshire Hathaway is organized as an insurance company with an insurance company’s ability to defer income while in in reality it’s a mutual fund. The special deal Buffett got from the Washington Post is simply one in a long string of special deals that Buffett has been able to pull off because of his wealth. A lot of the businesses that he owns were purchased as below-market deals because the heirs of the founder wanted to cash out.

Rush Limbaugh is right about Buffett: he’s using his tax-me-more rhetoric to deflect the Left from going after his wealth by pretending he’s one of them. And they have always fallen for it. In reality, Buffett, not Romney, is the real vulture capitalist, swooping in on sick and dying companies and lending them money in return for terms that no one else can get. He’s made literally billions that way. This Washington Post dividend is simply the cherry on the sundae.

Warren Buffett: Crony Capitalist

Warren Buffett’s reputation is bigger than his ability. How can this person outperform the market for so many years by simply buying stocks and bonds is the question most often asked? What makes him so much smarter than the average investor? It’s really very simple, he has billions of dollars of assets that people will go to extraordinary lengths to borrow ... and he’s a crony capitalist.

The first advantage is that he has lots of money. He uses the money to buy out closely held companies for pennies on the dollar when the family wants to cash out. You don’t, so you don’t get in on this deal. He uses more money to bail out troubled companies who give him special shares of preferred stock (see GS below) with a huge dividend plus an equity kicker. You don’t, so you don’t get to be called the “Sage of Podunk.”

He also designs government bailout plans and then buys stock in the companies he tells government to bail out. All the while he’s grinning his shit eating grin and telling us that with his billions in the bank he doesn’t pay himself a high income so that his secretary’s in a higher tax bracket. Here’s a question of Uncle Warren at the next board meeting: “Why do you bother to pay yourself any salary at all?”

From"Throw Them All Out."

In the wake of the $700 billion TARP bailout, Warren Buffett apparently shaped a plan to clean up toxic assets that Treasury Secretary Tim Geithner later adopted–resulting in massive profits for Buffett.


According to Schweizer, after the bailout bill’s passage, Warren Buffett sat down and wrote then-Treasury Secretary Henry Paulson a four-page private letter laying out a plan to clean up the toxic assets plaguing numerous financial institutions. ...


After Paulson’s exit, incoming Treasury Secretary Tim Geithner tweaked the plan and rolled it out in March 2009. But according to quarterly reports from Buffett’s holdings company, Berkshire Hathaway, between the time the billionaire crafted his plan and Geithner adopted it, Buffett quietly purchased 12.4 million shares of Wells Fargo stock and 1.5 million shares of U.S. Bancorp. Once the government unveiled its “Public-Private Investment Program,” bank stocks jumped, resulting in large profits for Buffett.


How much Buffett profited is hard to calculate, since there’s no way to know what his purchase price was. But prior to the government adopting Buffett’s plan, Wells Fargo had been trading at roughly $20 a share. In the weeks after Geithner’s announcement, the stock jumped to $30 a share. Likewise, U.S. Bancorp went from $8 in February 2009 to more than $20 a share by May.


Schweizer’s revelations contradict the image Warren Buffett has worked hard to create as that of a folksy, grandfatherly figure who stays above the political fray and rarely gets mired in the muck of partisan politics. ..


For example, Schweizer examines Buffett’s intense private lobbying efforts and deftly-timed stock buys that leveraged TARP bailout monies to create up to $3.7 billion in windfall profits for Berkshire Hathaway.


In September of 2008, Buffett invested $5 billion in the over-leveraged investment house of Goldman Sachs, having obtained impressive terms: Berkshire Hathaway would receive preferred stock with a 10% dividend yield, and the option to buy another $5 billion at $115 a share.


As the political debates surrounding the proposed $700 billion TARP bailout bill heated up, Buffett maintained an appearance of naivete, an “aw shucks” shtick that deferred to the judgment of politicians. “I’m not brave enough to try to influence the Congress,” Buffett told the New York Times.


Behind closed doors, however, Buffett had become a shrewd political entrepreneur. With his Goldman bet in place, the billionaire exerted his considerable political influence in a private conference call with then-Speaker of the House Nancy Pelosi and House Democrats. During the meeting, Buffett strongly urged Democratic members to pass the $700 billion TARP bill to avert what he warned would otherwise be “the biggest financial meltdown in American history.”


Buffett had a strong financial interest in the bailout’s passage, says Schweizer. “If the bailout went through, it would be a windfall for Goldman. If it failed, it would be disastrous for Berkshire Hathaway.”


Yet Buffett had little reason to worry; his insider political connections afforded him two guarantees. First, many members of Congress were themselves investing heavily in Berkshire Hathaway throughout the bailout talks–a move that may simply have been a good investment in an unsteady time, or else a shrewd exploitation of unique information. Senator Dick Durbin (D-IL), for example, snatched up $130,000 worth of Berkshire Hathaway stock. Senator Orrin Hatch (R-UT) also bought shares in Berkshire Hathaway, as did Senator Claire McCaskill (D-MO), who purchased half a million dollars’ worth just days after the Wall Street bailout bill was signed. Second, Buffett knew he had an ally in the surging Barack Obama. Buffett had backed Obama in 2008. And as Obama has himself conceded, “Warren Buffett is one of those people that I listen to.”


When the TARP bailout passed, Berkshire Hathaway firms received a staggering $95 billion in bailout cash from U.S. taxpayers. In total, TARP-assisted companies made up almost a third (30%) of Buffett’s entire publicly disclosed stock portfolio. The payoff: by July 2009, Buffett’s Goldman bet and his congressional jawboning had yielded profits as high as $3.7 billion.


Incredibly, in a breathtaking public relations move, Buffett publicly complained that the government bailouts had put his company at a disadvantage, because funders “who are using imaginative methods (or lobbying skills) to come under the government’s umbrella–have money costs that are minimal.” Rolfe Winkler of Reuters best captured Buffet’s audacity: “It takes chutzpah to lobby for bailouts, make trades seeking to profit from them, and then complain that those doing so put you at a disadvantage.”