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Saturday, April 30, 2011

Another Mystery Solved

I have wondered why Warren Buffett would invest $5 Billion in Goldman Sachs in September, 2008. Goldman was teetering on the edge of bankruptcy and Hank Paulson was scrambling to find a way to save them. It made no sense to invest in a company that might be bankrupt in a matter of days or weeks.

Now, Business Week explains it all this week. "Third, the $700 Trillion worth of derivatives that ignited the recession are not covered by Dodd-Frank. Warren Buffett successfully lobbied for their exclusion, saying it would be tantamount to rewriting old contracts and would force healthy derivative players such as his own Berkshire Hathaway to post collateral on old deals."

And there you have it. Warren had to keep Goldman alive to keep his own house of bad derivatives from crumbling around his head.

Turns of out that nice old man from Omaha is just as selfish and crooked a player as the rest of the Wall Street crooks.

At least the mystery is solved.

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