Buffett Vs Paulson
I was listening to Joseph Stiglitz on NPR this morning, and he had a very interesting comparison. (Quoting from an op-ed in the Guardian):
For all the show of toughness, the details suggest the US taxpayer got a raw deal. There is no comparison with the terms that Warren Buffett secured when he provided capital to Goldman Sachs. Buffett got a warrant – the right to buy in the future at a price that was even below the depressed price at the time. Paulson got for the US a warrant to buy in the future – at whatever the prevailing price at the time. The whole point of the warrant is so we participate in some of the upside, as the economy recovers from the crisis, and as the financial system starts to work.
The Paulson plan responded to Congress’s demand to have something like a warrant, but as a matter of form, not substance. Buffett got warrants equal to 100% of the value of what he put in. America’s taxpayers got just 15%. Moreover, as George Soros has pointed out, in a few years time, when the economy is recovered, the banks shouldn’t need to turn to the government for capital. The government should have issued convertible shares that gave the right to the government to automatically share in the gain in share price.
He also mentioned (as I recall) that Buffett got an end to dividend payments during the crisis and a higher deferred payment than Paulson imposed.