Kevin Price On The Oracle Of Omaha's View Of Ben Bernanke

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Warren Buffett on the Business and Government Connection Warren Buffett rolled up his sleeves on  the Fox Business Network in a very candid interview with the channel’s Liz Claman, in which he discussed CEOs of failing banks, reconfirming Ben Bernanke, and his Berkshire  company. On the Bank Situation: “You’ll always have banks that are too big to fail. We can’t operate in this world without  very big banks…If they are toppling the government will have to do something about it.” This is contrary to conventional wisdom and of this writer. After a year we see that banks  had more money than expected (witnessed in the pace in which they paid off their bailouts)  and these government programs have done little to increase the pace of loans, since banks  have found a way to get “money for nothing.” Why risk their resources if they are washed  in capital from Uncle Sam? Furthermore, these policies have only undermined moral hazard at a time it is so greatly  needed. The US cannot be in the business of rewarding bad decision making. "If I were running things and a bank had to go to the government for help, the CEO and  his wife would forfeit all their net worth…I think you have to change the incentives.  The incentives a few years ago were try and report higher quarterly earnings. It’s nice  to have carrots, but you need sticks. The idea that some guy who’s worth $500 million  leaves and only has $50 million left is not much of a stick as far as I’m concerned." This was actually the highlight in the Buffett interview. " We need a restoration of moral hazard in banking and that will only come when those  responsible for bad decision making suffers for those choices. The CEO has to be the chief  risk officer for a bank.”  This is a great observation and a view that needs to be restored. This is best achieved, in my opinion, by letting banks fail.  Any executives behind such will find themselves  looking for something else to do for a living. On members of Congress who feel Ben Bernanke should not be reconfirmed: “They ought to get down on their knees every night and thank the Lord that Bernanke was  there through this. He took some unprecedented actions…He took the actions that were  necessary to prevent panic from paralyzing this country.”  “Unprecedented” often means unconstitutional and has led to the expansion of government  like we have never seen in our history, even in the Great Depression. What he has done  is created instability in our monetary policy by pumping dollars into the economy at a  pace we have never seen. Furthermore, his bailouts of large corporations have undermined  the normal functions of a free market economy, such as moral hazard. He has created an  economy without risk, which is far from free market in design. What he has done is criminal… two thumbs up for those members of Congress who wish to see him go. On the future of Berkshire Hathaway’s business acquisition: “We’ll keep buying businesses, as long as I’m alive we’ll keep buying businesses…we’ll try  to buy them for cash, sometimes we may have to use some stock, but we’ll use as little stock as possible.”  If the US economy continues to reel from the unstable monetary and  fiscal policies of the Obama administration, large corporations like Berkshire Hathaway will continue to benefit from them. It should be no wonder that, when questioned about Tim Geithner, he replied “I think he’s terrific.” Maybe for Buffett, but not the rest of the country. ____________________________________________________________________________________________________ Kevin Price is the host of “Price of Business”, M-F at 11 am on CNN 650 and CBS Radio and can  be frequently found in the “Strategy Room” at FoxNews.com. A syndicated columnist whose  article appear at Reuters, Chicago Sun Times, USA Today, and other media, his BizPlusBlog.com  is ranked in the top 1 percent of all blogs by Technorati. His articles also appear regularly  at AmericanDailyReview.com and RenewAmerica.com, Examiner.com, and others.