Greed still rules Wall Street

Mar.04, 2008 in Market Outlook

There’s no ‘$’ in teamwork

Commentary: Wall Street’s bailouts are about profit

By David Weidner, MarketWatch

Last Update: 12:01 AM ET Mar 4, 2008

NEW YORK (MarketWatch) — I can do Mark Bittman 13 better.

Bittman wrote in the March 2 New York Times that he took a “real” day off on a
recent weekend. No e-mail. No cell phone. No computers. This columnist was out of
pocket too, not for 24 hours, but for nearly two weeks. Sure, I cheated a little.
I needed a cell phone to line up a whale-watching excursion, but for the most
part, it was an analog existence and this page was dark.

Now, no matter how hard you try, you can never get too far from Wall Street. Try
filling up a rental car with gas approaching $5 a gallon and tell me if you don’t
think something is happening to the price of oil.

Intellectual distance can, however, skew your thinking. Cutting off from business
news did have an unintended effect: I began to think the financial industry was
trying to pull itself out of the credit and economic crisis it faces. Warren
Buffett was bailing out bond insurers. Banks were helping some borrowers meet
payments. The Federal Reserve was feeding the economy rate cuts. Nodding off on
the beach, it all felt like teamwork.

It didn’t take but 10 minutes catching up on the last two weeks of business news
to realize how silly a notion that was. Greed, dear readers, is the key factor in
every story on the business page, every move the market makes, every bailout or
rescue plan that great economic forces put into play.

Here are a few examples:

Bond insurer bailouts

When Buffett comes a-calling to save an industry, you can bet he’s looking at
selling that industry at a profit down the road. This pattern doesn’t make the
head of Berkshire Hathaway Inc. (BRKA) a bad guy. Instead, it makes him the great
investor he’s renowned to be.

Buffett also turned up the pressure on the bond insurers with his annual letter
to shareholders. In it, he lambasted the funding of local and state government
pension funds as “woefully inadequate” even though the threat of default for most
main bonds is slim.

As the Obama campaign might say, Buffett has dropped a fear bomb into the markets
so he can get his targets on the cheap.

So, for all of the bad mistakes the heads of Ambac Financial Group Inc. (ABK),
MBIA Inc. (MBI) and others have made, they got it right when they shunned
Buffett’s offer to “reinsure” those municipal bonds. Instead, Wilbur Ross’s $1
billion offer to Assured Guaranty was accepted, in part because it didn’t come
with the fees Buffett’s offer did.

Buffett has since walked away from his offer, but you can’t blame him for trying.

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