Mr. Buffett an advocate of Lloyd Blankfein?   In the NY Times article below, Mr. Buffet appears unabashedly supportive of Goldman Sachs, and the Goldman leadership that played no small part in leveling the world economy.

And wasn’t it Mr. Buffet who called derivates and credit default swaps “financial weapons of mass destruction?”  And yet, we hear that the Oracle of Omaha, Ayn Rand personified, is upset about the proposed regulation of the derivatives market, pending in Congress.

Why?  Well apparently, Mr. Buffett’s diverse financial interests, have a considerable holding of “financial weapons of mass destruction.”

And before the global destruction of the economy, Mr. Buffet’s reinsurance company, Gen Re, had serious relations with Mr. Greenberg’s  AIG, whereby several Gen Re Executives served prison time for, allegedly, helping AIG to cook the books, all so that, allegedly, Mr. Greenberg could show a never ending stream of quarterly profits.

Who would have ever thought that Mr. Buffett would not only be linked, but actually, embrace Mr. Blankfein?  Could the Oracle’s squeaky clean image be undone by the company he keeps:  Mr. Greenberg?  Mr. Blankfein?

After Mr. Buffett opined on Mr. Blankein and Goldman, his right arm, Mr. Munger, quickly stepped in, per the Times:  “Mr. Munger, Berkshire’s vice chairman, said that there is a difference between behaving legally and behaving ethically — and that a business should not simply follow the former.”

Mr. Munger is on the right track.  The business leaders of today and tomorrow cannot merely, focus on utilizing a platoon of attorneys to justify ramming their corporations within a hair’s breadth of breaking the law, with the goal of maxing out quarterly profits.  And the old premise that everybody else is doing “it,” and if I don’t “do it,” my company will be uncompetitive simply will not hold water, if the proper steps are taken.

In short, the corporate culture of quarterly profits - Uber Alles! - needs to be softened into a more socially responsible – kinder and gentler form – of corporate altruism, and socially conscientious corporate leadership.  Nothing wrong with profits, but how those profits are made could ultimately, make or break a company’s stockholders, management, employees, and customers.

If Americans and indeed, the world, have learned anything over the last 2.5 years, it is this:  the laissez faire wild west show needs to come to end.   And if a few bad players out there - remain, how do we keep them in check, human nature being what it is?   In addition to eliminating too big to fail banks, stepping up the regulation (and hiring regulators with a spine, who will actually enforce the rules of the road), and wiping out the moral hazard that is pervasive with the rating agencies (who derive their profits from the very firms they are responsible for appraising)…. The next governmental effort at reform need to be focused on the total lack of transparency in what passes for public accounting.

And if we really want to get utopian, the U.S. government should leverage and push governments around the globe to adopt universal:  business tax laws, accounting standards, and labor laws.   This will cut down on arbitrage, and keep more jobs and tax receipts in the U.S.  That is to say, keep America, Americans, and American business strong!

Business reform, assessment, and regulation should be a dynamic and on-going process, and hopefully, will not end with the present legislation before congress. This also means regs that fail, or are not needed, should be abandoned as part of ongoing review and assessment... obviously, it's a two way street.

Socially conscious corporate leadership will mean a more long term tack in steering the corporate ship of state, one that will preserve and protect the ship, itself.  At the end of the day, making boat loads of money and doing the right thing can be one in the same.

-       J.M.H.


May 1, 2010/NYTIMES

Warren E. Buffett became the highest-profile defender of Goldman Sachs on Saturday, offering staunch support of the firm as it combats fraud charges from the Securities and Exchange Commission.

Mr. Buffett also strongly defended the firm’s chief executive, Lloyd C. Blankfein, saying he did not think Mr. Blankfein needed to be replaced.

His support for Goldman came in a question-and-answer session at the annual meeting in Omaha of Berkshire Hathaway, the giant insurance and investment firm Mr. Buffett runs. Berkshire owns $5 billion of preferred stock in Goldman.

The S.E.C. suit against Goldman stems from a complex investment deal the firm put together in 2007. The Justice Department has also begun a preliminary inquiry into Goldman’s mortgage activities before the financial crisis, according to people briefed on the matter.

Goldman denies any wrongdoing. Yet the firm has been battered by the S.E.C.’s charges, having lost about $21 billion in market value in the two weeks since the regulator filed its suit.

Berkshire’s annual meeting has become a sort of Woodstock for capitalists, drawing tens of thousands of investors each year. In a packed auditorium, Mr. Buffet was questioned for almost five hours by shareholders and a panel of journalists that included a reporter for The New York Times.

In wide-ranging comments that spanned from Goldman to a proposed overhaul of financial regulation to Greece’s debt crisis, Mr. Buffett said the global economy had largely improved. That was reflected in Berkshire’s first-quarter results: $3.6 billion in net income, a sharp swing from the $1.5 billion loss it posted at the same time last year.

Still, what drew the most attention was Mr. Buffett’s full-throated support for Goldman. He drew upon some of the same points that Goldman has used in its own defense, including the sophistication of the investors the S.E.C. says were defrauded by Goldman’s lack of adequate disclosure in the deal. He said those investors should have conducted better due diligence. Of one investor, he said, “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”

He also stood behind Mr. Blankfein. When asked whom he would select if Goldman needed to find a new leader, Mr. Buffett replied, “If Lloyd had a twin brother, I would vote for him.”

Mr. Buffett has a significant investment in Goldman. In 2008, during the depths of the financial crisis, Berkshire invested $5 billion in preferred shares. Those shares carry a 10 percent interest rate, meaning that Berkshire is earning about $500 million a year from its holdings. (Or as Mr. Buffett put it, $15 a second.)

Though Mr. Buffett said the S.E.C. lawsuit had not yet negatively influenced his opinion of Goldman, he said he would revise his thinking if new evidence came to light.

Mr. Buffett added that Goldman is a longtime adviser that “helped build Berkshire Hathaway” by selling them businesses for more than 50 years.

Mr. Buffett’s longtime lieutenant, Charles Munger, tempered his boss’s kind words. Mr. Munger, Berkshire’s vice chairman, said that there is a difference between behaving legally and behaving ethically — and that a business should not simply follow the former.

Mr. Buffett also weighed in on the financial regulation overhaul bill that is pending in the Senate, which include provisions that may force investors in derivatives contracts to add more collateral to their holdings. (Berkshire has lobbied against such provisions.) Mr. Buffett said that Berkshire was unlikely to be forced to “put up a dime” in additional money on its existing contracts, though he added that the firm would do so if required.