Buffet Sez: Make the Fat Cats Pay
I love Warren Buffet. He strikes me as the closest thing we’ve got to Harry Truman, the ultimate straight shooter. Buffett has been the chairman of Berkshire Hathaway since 1965 and has had an annual salary of $100,000 for the last 25 years. In a letter last Saturday to his shareholders, he was very critical of those “too big to fail” banks. According to an article in Fortune Magazine, Buffett said there’s one easy way to fix the problems with these banks: make sure the high-level execs have some skin in the game by putting their bank accounts on the line. What a great idea!
Fortune quotes from Buffett’s letter: “It’s the behavior of these CEO’s and directors that needs to be changed. They have long benefitted from oversized financial carrots; some meaningful sticks now need to be employed as well. The CEO’s and directors have largely gone unscathed.” Case in point: Neither of the former executives of Bear Stearns or Lehman Brothers had very much of their wealth tied to their former respective firms as they ran their companies into the ground. It was the smaller shareholders (and ultimately the American taxpayers) who bore the brunt of the huge losses.
The Obama Administration has proposed separating the banks’ proprietary trading activities from their federally subsidized deposit-gathering and lending. Others have proposed requiring the banks to hike the amount of money they have on hand to guard against losses. So far, there aren’t enough votes in Congress to get anything done. I like Warren’s way. Until next time, here’s to good planning!
Great article, as always! Thanks for bringing these bits of information forward.
Very interesting.