Buffett: Execs should pay price for risky bets

[cory777]

Source: AP

By JOSH FUNK, AP Business Writer Josh Funk, Ap Business Writer – Sat Feb 27, 4:08 pm ET

OMAHA, Neb. – Billionaire Warren Buffett, in his annual letter to shareholders, sternly urged companies to develop harsh penalties for executives who get into trouble with risky investments.

Buffett's Berkshire Hathaway Inc. delivered a 61 percent jump in net income because the value of its investments and derivatives rose sharply in 2009 after taking a beating the year before. But its businesses' exposure to housing construction helped keep it from outperforming the S&P 500 for the first time since 2004.

Buffett used most of his letter, released Saturday, to reiterate the business basics that have made his company a juggernaut. But it did include a section about how corporations should manage risk. Buffett said CEOs and the boards that hired them should pay a steep price if their companies get into trouble with risky investments.

Buffett lamented that shareholders, not CEOs and directors, have borne most of the burden of company failures during the economic crisis.

"In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control," Buffett wrote. "If he's incapable of handling that job, he should look for other employment. And if he fails at it — with the government thereupon required to step in with funds or guarantees — the financial consequences for him and his board should be severe."

Read more: http://news.yahoo.com/s/ap/20100227/ap_on_bi_ge/us_buffett_letter

---

echo echo echo

[laughingliberal]

1. Rec nt

[wroberts189]

2. off to the greatest with ya knr/nt

[bvar22]

3. What?..Someone else "begrudging" their MIllions...

...while Main Street sinks below the waves?

We should be happy that FAILED Wall Street Execs and Health Insurance CEOs will never know a moment of discomfort.
...its the Giant Invisible Hand at Work.

and...and..Look at all the baseball players...
:party:

[DisgustedInMN]

19. There ya go!

Wippeee!

[liberation]

4. Funny, coming from one of the major investors in Goldman Sachs...

I am surprised how this greedy son of a bitch can keep a straight face when he does the hole "innocent grandpa" routine.

[4lbs]

13. Did you not read where B.H. lost a bunch of money in 2008 by doing that?

So, yes, he invested in Goldman Sachs. He also lost a bunch of money doing it.

Nevertheless, his Berkshire Hathaway fund has 4 great years to 1 bad year on average. There's a reason he prices his stock so high. He doesn't want nervous idiots investing, nor the type that check the stocks every hour and have itchy triggers to buy/sell. He only wants people that will invest and leave it there for years.

Greedy? Like how he turned over $45 billion of his own money to be given away to charity? That kind of greedy?

[liberation]

25. Actually... Berkshire has done handsomelly off their Goldman investment

they "lost" so much money on GS that they increased their investment just recently. It does not get any more two faced, than trying to publicly chastise those "bad people" in Wallstreet, while privately he does not only continue investing, but actually increased Berkshire's stake, in one of the main culprits for the recent meltdown. They don't call it "put your money where your mouth is" for nothing, and if you look at BS holdings, you know exactly where their "mouth" is...

And, yes a person worth billions and billions of dollars by simply moving money around, all while at least 2 billion other humans on this earth go to bed hungry or don't have access to the most basic quality of life, it is the very definition of greedy. Regardless of whether or not he decides to stuff a bunch of billions in a tax free fund.

Good grief, the financial class are the very people who have pushed us into this mess. And all they have to do is a couple of PR stunts, and the gullible eat it all out... LOL

[Enthusiast]

23. I don't think we should

change the subject. What he says is true and needs to be of greater focus. His problems are another issue.

[Psephos]

24. He has donated 90% of all his money to charity. Not exactly my idea of greedy. n/t

[liberation]

26. The Gates foundation is not a charity...

And there is a difference between saying you are going to do something, and actually doing it. He is still worth $40 billion as of today.

I am sorry, but the financial class in this country are the very culprits of the clusterfuck that has been visited on all of us. And Mr. Buffet is at the apex of that class. Now, I am not saying Mr. Buffet is not an accomplished and smart person. Nothing of the sort, it is just that he is not in the position of lecturing anyone right now. Because in doing so, he is being a hypocrite of the largest magnitude.

[sulphurdunn]

32. Agreed.. It is said, as an an apology of sorts, that

Mussolini made the trains run on time, and that Hitler built the Autobahn.

[Psephos]

39. This is the kind of B.S. that ideology causes otherwise intelligent people to spread.

The IRS treats the BMG Foundation as a tax-exempt charity. I give their opinion more weight than yours.

Meanwhile, The Nation disagrees with you.
http://www.thenation.com/doc/20090921/patel_et_al

So does the NY Times.
http://topics.nytimes.com/top/reference/timestopics/organizations/g/gates_bill_and_melinda_foundation/index.html

Millions of people in Africa who will benefit from vaccine development and provision by the BMG Foundation probably will decide the matter on practical, rather than ideological, terms.
http://www.usatoday.com/news/world/2010-01-29-gates-vaccines_N.htm

Here's the Buffett donation story straight from the source. There are legions of assholes who did truly screw us over. Buffett is not one of them.
http://money.cnn.com/2006/06/25/magazines/fortune/charity1.fortune/
http://money.cnn.com/2006/06/25/magazines/fortune/charity2.fortune/index.htm

Are BMG and Buffett saints? No. Are they doing things that could be legitimately criticized? Undoubtedly.

Are their donated billions likely to increase or decrease the world's supply of misery?

:) This is where ideologues and empiricists part company.

BTW, since you brought up the subject of hypocrisy, what have you put back out into the world?

[bemildred]

5. Fire their asses when they fuck up.

That's what happens to the rest of us.

[Dr.Phool]

6. What!!?? If they don't give them more salaries and bigger bounuses,

They'll leave and go somewhere else.

[Moostache]

7. Hear, hear!!!

Everyone already knows this is true....when you are playing with house money and have nothing personally at stake (hell, even the guys who FAILED miserably got huge money and bonuses and in Geithner's case a cushy government job too!).

I would love to see the CEO compensation stripped down to ZERO in these cases; and in fact, if they made bad bets in previous time-frames, then claimed a bonus and salary based on those bets, then that compensation should be retroactively returned to company for settling debts BEFORE any public money is used.

There should be legislation that clearly spells this out and makes another round of federal bailouts an absolute impossibility!!!

[SlingBlade]

8. So this is how the Gilded Age ends !

[Wapsie B]

9. "But those salaries and bonuses are contractual obligations"

said the stocker working the graveyard shift at Wally World. I forget how many people I've seen spewing that nonsense and decidedly middle to lower-middle class, with no conceivable way of ever approaching the income level of the robber barons they so blindly stand up for. :eyes:

[niceypoo]

10. It's quite obvious what need be done

Your company gets a bailout, your company gets broken up. No exceptions.

[Cessna Invesco Palin]

12. What the hell is the point of that? n/t

[JHB]

14. It addresses the "too big to fail" problem n/t

[mbperrin]

16. Precisely! No longer too big to fail, problem solved.

How good were you at running the firm if you needed a bailout?

[JHB]

18. I'm not so sure I'd use the word "solved"...

...if the "bulls" all stampede off a cliff, it'd be a bloody mess no matter if it were one big bull or a herd of smaller ones,
but a judicious breakup would provide more options and flexibility.

[mbperrin]

22. If there's just one bull, he's all over the cliff or he's okay. With many

smaller bulls, some may fall, but there's no reason all have to. Smarter bulls live, dumber bulls die. In the case of only one bull, you've got one or none, depending on the outcome.

Adam Smith certainly never supported just having one bull.

[Cessna Invesco Palin]

28. So you think every bank rescued by FDIC should be broken up?

Even local credit unions? That makes no goddamn sense.

[JHB]

29. How many FDIC banks are "too big to fail"?

I wasn't necesarily agreeing with the poster; there are a number of ways of handling things, and I prefer to pick the one or ones most appropriate to a specific case.

But you asked a question, and I answered it.

[Cessna Invesco Palin]

44. AFAIK the only institution to which that term has been applied is AIG.

But hey, it's a buzzword, so if I make a post with buzzwords it has to be correct!

[niceypoo]

30. I think every company bailed out by congress and the president

...needs to be broken up, without exception. The executives take huge risks because they know that 'we the people' will absorb all of the losses, because they are too big to fail and all doncha know.

[Cessna Invesco Palin]

43. So how exactly would you suggest breaking up GM?

Since you're going to use a one-size-fits-all approach, I want to hear a fucking explanation of how this would actually work. How would YOU suggest we break up GM? What would be the units into which it is broken up? What would be their interactions with each other, if any? How would the debt load be structured?

Go ahead. I'm all ears.

[Overseas]

11. K&R . //nt

[mbperrin]

15. Ahhh, he's just another bitter dead-ender begrudging geniuses like

Lloyd Blankfein their due! How do I know Blankfein's a genius? He said so, and a rich guy like him must know! After all, Warren Buffett is just the second richest man in the world, and LB is not even a billionaire (what? could that be correct?).


Well....never mind, but the whole idea of holding execs accountable for their decisions is communism or something like it!















If I need a sarcasm tag, please have your IQ checked immediately.

[JHB]

17. So does Buffet support rewriting the rules for board membership?

One of the major problems in fixing this is capture of the directors by the CEO: where they may "hire" the CEO, but the CEO has de facto control of the board, so the body that's supposed to be a check and balance on the CEO becomes a rubber stamp.

[blondeatlast]

20. There is no arguing with B-H's success. Good for Mr. B--

hard to take issue with him.

[DailyGrind51]

21. If a cashier comes up short in his/her cash drawer at the end of a shift,

he/she must make it up out-of-pocket or get fired. Why shouldn't execs be subject to the same accountability?

[ck4829]

27. K&R

[DissedByBush]

31. This is the disconnect that is ruining capitalism

The CEOs not suffering the results of their failures disconnects the feedback and ruins everything.

Capitalism requires that feedback in order to keep people honest.

[sam sarrha]

33. start simple.. if they lose more than they can personally pay back.. HANG THEM..!!

[scottsoperson]

34. i am against capital punishment

hoover would have been against a bank bailout.

[niceypoo]

35. Would he be against breaking up the 'too big to fail' companies?

...when their CEOs run them into the ground knowing the losses will be absorbed by we the people?

[scottsoperson]

36. let's see?

After the crash Hoover announced that while he would keep the Federal budget balanced, he would cut taxes and expand public works spending.

[scottsoperson]

37. what about this?

This view explains President Hoover's vigorous counterattack in the wake of Wall Street's initial tumble. Not all of his advisers were so willing to abandon Boom and Bust theories. As late as 1930, Secretary of the Treasury Andrew Mellon held that a panic might not be such a bad thing. "It will purge the rottenness out of the system," he added. "High costs of living...will come down. People will work harder, live a moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." Mellon lost out, however, and was packed off to the Court of Saint James.

[scottsoperson]

38. tariffs were not such a good idea

The president's critics argued that in approving the Smoot-Hawley Tariff in the spring of 1930, he unintentionally raised barriers around U.S. products, worsened the plight of debtor nations and set off a round of retaliatory measures that crippled global trade.

[sam sarrha]

45. i'm talking about small single digit tarifs to fund education/training. people cant afford collage

and the middle class will spiral into a cycle of inescapable poverty

bottom 80% only have 7% 0f financial wealth.. and its getting worse.
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

http://www.youtube.com/watch?v=woIkIph5xcU

[sam sarrha]

me to.. but we need examples for Psychopaths to live by or die from.

[sam sarrha]

40. ... dupe

[scottsoperson]

41. things could have been much worse

Learning lessons of the 1930s

Significant policy changes since the 1930s will also cushion the blow.

Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.

"There's a lot more safeguards in place," said Keith Hembre, chief economist at First American Funds.

Hembre said the $787 billion stimulus bill passed by Congress in February will also spur more economic activity down the road.

In addition, the Federal Reserve, led by Great Depression expert Ben Bernanke, has pumped trillions of dollars into the economy with new lending programs the central bank has never tried before. That has swelled the supply of money. By way of contrast, the money supply tightened during the Great Depression.

[scottsoperson]

42. much worse

NEW YORK (CNNMoney.com) -- Stocks skidded Monday, with the Dow slumping nearly 778 points, in the biggest single-day point loss ever, after the House rejected the government's $700 billion bank bailout plan.