This morning, CNBC had an unusually good interview with billionaire investor Warren Buffett. They talked to him about a variety of topics including Berkshire Hathaway's 50-1 stock split, Wells Fargo's earnings and the economic picture. I wanted to note a few of the most interesting things he said, which included President Obama's banker tax, the stock market recovery and the Kraft-Cadbury deal.
First, I was really surprised how adamantly opposed Buffett was to the bank tax. I wasn't shocked so much because it's such a great idea. Actually, I think it's a pretty ridiculous idea, for the same reason that Buffett does. He says about the tax:
No, I don't understand that. If it's some kind of a guilt tax or something of that sort because banks were among the whole United States that were saved back in 2008, everybody was taken care of then. And the banks, basically, somebody like Wells, it's cost them a lot of money to be in the TARP and it was basically forced upon them. (They) didn't want to take the money, but really had no choice. So that's cost Wells a lot of money. The government's made a lot of money off Wells. They've made a lot of money off Goldman. They've made a lot of money off J.P. Morgan. And where they're going to lose money, at least where its possible they'll lose money, is in the auto companies. So if you're going after the people you saved, you might say GM shareholders didn't get saved, the GM bondholders didn't get saved. What happened there is they kept employment. I'm the last guy to suggest that you should go and put a special tax on autoworkers. (Laughs.) If you're really looking for the people who benefited from government losses, you'd have to look there. Or if you look at Fannie or Freddie. Are you going to go and tax the members of Congress who ran Freddie and Fannie?
So it's not his logic that surprised me -- I completely agree with him -- but more that he'd so transparently reject an Obama administration proposal. You may remember, during the 2008 election, Buffett was a staunch supporter of Barack Obama. At the end of the day, Buffett is obviously more of an investor than a political operative, but I was still surprised that he wasn't a little more diplomatic about his stance, given his allegiance to the administration.
Of course, it's also important to remember that Buffett is a bank investor. So really, the tax on banks is a tax on Buffett. In fact, I would argue that the tax will affect bank shareholders more than bank employees, even though it was likely created mostly as a response to large banker bonuses. As I've noted in the past, those bonus numbers detract from the revenue that could be provided to shareholders in the form of dividends or firm growth. Yet, it's hard for banks to pay its employees less, because they worry about their departure to hedge funds or other financial services firms that can offer better pay. As a result, it's easier to provide shareholders with smaller dividends or slower growth, both of which ultimately hurt long-term investors like Buffett. For that reason, Buffett also implied that he'd like to see bonuses smaller, so to provide greater returns for shareholders -- as you might expect.