Capitalism Without Failure Is Like Christianity Without Hell
This was another classic quote from Warren Buffett during the annual Berkshire Hathaway shareholders meeting, where he and Charlie Munger give their only planned news conference each year.
He is specifically referring to bailing out more banks and lenders who had a large part in creating the current trouble we are in as a whole. Buffett said this about the Bear Stearns bailout:
“The Federal Reserve’s bailout of Bear Stearns Cos. likely prevented a crisis among investment banks because Bear Stearns held a large number of derivative contracts with other investment banks. If Bear Stearns went bankrupt, all those derivatives would have to be valued at zero or unloaded quickly.”
But he and Munger agreed that not every business or investment bank should be rescued, because failure is an important part of capitalism (see title of this post).
They also aren’t opposed to Congress helping certain “homedebtors” (as opposed to homeowners) who were taken advantage of and misled:
“Lenders and investors who were dumb enough to deal in subprime mortgages should not receive any special help, Buffett said, but if homeowners were deceived about the terms of adjustable mortgages, they should be helped.”
When Warren speaks, it is usually very wise to listen and heed his advice.
