Sidewalk Shell Game….Hits the Big Time
Goldman to Raise Capital, With $5 Billion From Buffett
The billionaire Warren E. Buffett will invest $5 billion in the investment bank Goldman Sachs, as part of the bank's efforts to raise $7.5 billion in fresh capital, a Goldman spokesman, Lucas Van Praag, said Tuesday. In return, Berkshire Hathaway, the conglomerate run by Mr. Buffett, will receive perpetual preferred shares in Goldman, Mr. Praag said. The preferred stock will pay a 10 percent dividend.
So here's how a real bailout works: Goldman Sachs needs money, Warren Buffet gives them money. In return, Warren Buffet gets stock that pays a ten percent dividend.
Now, for comparison, here's the shell game version. Keep your eye on the pea.
(1) Goldman Sachs gives Hank Paulson seven hundred million dollars (that's seven zero zero comma zero zero zero comma zero zero zero) in salary and bonuses.
(2) Goldman Sachs lends Hank Paulson to the Treasury (now that he can afford to be a public servant).
(3) As the Secretary of the Treasury, Paulson insists that we give Goldman Sachs a lot of money, in exchange for a lot of crap. (If not, we all die.)
(4) Except it's not Hank Paulson's money, it's ours.
(5) If the crap turns out to be crap, we're stuck with it. (And by the way: if it's not crap, why are they so desperate to unload it?)
(6) In four months, Paulson returns to Goldman Sachs.
(7) Paulson receives salary and bonuses from the money we just gave to Paulson to give to Goldman Sachs to give to Paulson.
(8) It's our money. Or was. But we don't get preferred shares. We don't get a ten percent dividend. We don't even get a free copy of The Warren Buffet Way: Second Edition (Paperback). We get crap.
In essence: when Goldman Sachs needs money, and the guy lending the money is rich, they give him something for it. When Goldman Sachs needs money, and the guy lending the money is us, they don't.
Why should they, unless they have to? And the way it stands now, they don't have to.
It's been said that when the dust clears from WWIII, the only things left standing will be Keith Richards, cockroaches, and the investment bank of Goldman Sachs. Having lived long enough to see the Stones, my old New York kitchen, and the events of the past week, I wish I could disagree.
P.S. - Warren Buffet today tells CNBC he wholeheartedly supports the bailout plan. So: our money goes (for free) to prop up a company he just invested $5,000,000,000 in. Why in God's good earth wouldn't he support it?
Goldman to Raise Capital, With $5 Billion From Buffett
The billionaire Warren E. Buffett will invest $5 billion in the investment bank Goldman Sachs, as part of the bank's efforts to raise $7.5 billion in fresh capital, a Goldman spokesman, Lucas Van Praag, said Tuesday. In return, Berkshire Hathaway, the conglomerate run by Mr. Buffett, will receive perpetual preferred shares in Goldman, Mr. Praag said. The preferred stock will pay a 10 percent dividend.
So here's how a real bailout works: Goldman Sachs needs money, Warren Buffet gives them money. In return, Warren Buffet gets stock that pays a ten percent dividend.
Now, for comparison, here's the shell game version. Keep your eye on the pea.
(1) Goldman Sachs gives Hank Paulson seven hundred million dollars (that's seven zero zero comma zero zero zero comma zero zero zero) in salary and bonuses.
(2) Goldman Sachs lends Hank Paulson to the Treasury (now that he can afford to be a public servant).
(3) As the Secretary of the Treasury, Paulson insists that we give Goldman Sachs a lot of money, in exchange for a lot of crap. (If not, we all die.)
(4) Except it's not Hank Paulson's money, it's ours.
(5) If the crap turns out to be crap, we're stuck with it. (And by the way: if it's not crap, why are they so desperate to unload it?)
(6) In four months, Paulson returns to Goldman Sachs.
(7) Paulson receives salary and bonuses from the money we just gave to Paulson to give to Goldman Sachs to give to Paulson.
(8) It's our money. Or was. But we don't get preferred shares. We don't get a ten percent dividend. We don't even get a free copy of The Warren Buffet Way: Second Edition (Paperback). We get crap.
In essence: when Goldman Sachs needs money, and the guy lending the money is rich, they give him something for it. When Goldman Sachs needs money, and the guy lending the money is us, they don't.
Why should they, unless they have to? And the way it stands now, they don't have to.
It's been said that when the dust clears from WWIII, the only things left standing will be Keith Richards, cockroaches, and the investment bank of Goldman Sachs. Having lived long enough to see the Stones, my old New York kitchen, and the events of the past week, I wish I could disagree.
P.S. - Warren Buffet today tells CNBC he wholeheartedly supports the bailout plan. So: our money goes (for free) to prop up a company he just invested $5,000,000,000 in. Why in God's good earth wouldn't he support it?
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