If you’ve been concerned about the state of the U.S. market, you can breath a sigh of relief: brilliant investor Warren buffet signaled confidence by investing five-billion dollars in financial giant Goldman Sachs. While relatively fit compared to many of the U.S. financial institutions in the news, Goldman Sachs has faced some challenges in the current turmoil. According to the WSJ, “its profits have waned and its stock got hit last week.” Buffet’s move can be seen as a sign that financially savvy minds are still confident in the economic power and resilience of the U.S.
Or perhaps it can be seen as a sign of something else entirely. Buffet has very publicly endorsed Treasury Secretary Paulson’s 700 billion dollar federal bailout proposal. Is Buffet seeing an opportunity to fertilize his investment with federal funds? He buys stock deeply discounted by the market slump, a massive injection of federal money reinvigorates the market, and the shrewd purchase yields a windfall profit.
I’ve seen plenty of plausible reasons to be skeptical of the the administration’s bailout proposal, from both sides of the aisle, including from both McCain and Obama. If this economic fiasco is one deep and momentous enough to require federal intervention (a debatable notion), it should most certainly be structured in such a way that the primary beneficiaries are those average people who are struggling to keep their small businesses, their homes, or food on the table. It should not allow the executives who ran these ships aground and held out a tin cup to Washington to walk away with golden parachutes. Nor should it fill the cups of savvy billionaires in the hopes that the bounty will trickle down to those who have suffered most from Wall Street’s short-sighted greed.