Warren Buffett Bank of America Deal Good Only for Warren Buffett

Warren Buffett “is not saving our economy” by investing $5 Billion in Bank of America,…”too much fawning, not enough “fair and balanced analysis.” So says Aaron Task, the host of The Daily Ticker. There is suspicion circulating that Obama has asked his earnest supporter, Warren Buffett, to invest in the flailing bank. Some say that suspicion is nothing short of a conspiracy theory.

Warren Buffet

Buffett has chided us that America “coddles the rich,” saying he pays less in taxes than his secretary. Task says Buffett isn’t investing in Bank of America out of patriotic duty, or for any reason other thank Capitalism and Profit. Buffett can pay more in taxes if he wants to. He can write a check and designate it for something, oh…like paying down the deficit and be fairly certain the check will be cashed and he will never know whether it went to the deficit or Obama’s stash.

I’ve heard several interesting conversations about why Warren Buffett pays the lower taxes he pays. Here’s how it works, explained by NewsMax:

For many years now Buffett has pointed out that he pays less tax than his secretary. How could the country’s most well-known billionaire, worth $50 billion, get away with that?

Here’s the significant reason — one that Buffett omits from his Op-Ed: He has traditionally drawn a tiny salary from his company Berkshire Hathaway and gives no dividends to shareholders like himself.

So, even if Buffett raised income tax rates on the wealthy, he might not pay significantly more in taxes. By keeping his wealth in his company, Buffett has discovered one of the best tax avoidance schemes ever invented. And Buffett never suggests that corporate loopholes that he’s personally taken advantage of for decades should be closed.

For example, his Berkshire Hathaway company has acted as an effective holding company for his vast investment portfolio. Last I checked, Berkshire Hathaway was generating over $7 billion in dividend income each year from stocks the company owned.

Due to a special exemption (read: loophole) Buffett enjoys, his company benefits from the fact that nearly 90 percent of the dividend income is exempt from any corporate tax! (I do too, as I am a shareholder as well.)

Buffett is then able to take these wads of tax-free cash and re-invest them, buying more stocks or whole companies — a strategy he’s been employing for decades as part of his wealth-creating money machine.

So Buffett knows that even if tax rates were raised on the income of the so-called “wealthy,” it would have little or no effect on the “super-rich” like himself who put a corporate shell around their assets and never disburse much cash to themselves in the form of income or dividends.

In fact, in the storied history of Berkshire Hathaway, Buffett has only once granted a dividend.

Back to Aaron Task. Find his very interesting article here or watch the video below. Here’s a snippet:

When the news broke that Buffett was investing in BofA, the chattering class rejoiced….Buffet has “saved” Bank of America”…Buffett Deal Is “Seal of Approval” … “Time to Buy Bank of America“… and my personal favorite: Buffett’s vote of confidence in B of A, US economy.

Warren Buffett is a great investor but the idea his deal with Bank of America is good for anyone but Warren Buffet is baloney.

Warren Buffett is investing in Bank of America for one simple reason — to make money. A lot money.

Just like extraordinarily wealthy Americans do everyday, but no doubt, Buffett scratched another worry off of Obama’s long list. Having Bank of America fail on his watch would complete the graying process that is well underway. Now on to that mega-fundraiser Buffett is hosting for his guy, Barack. Thanks to Instapundit, Glenn Reynold for this story.


Aaron Task: Warren Buffet and Bank of America (Video)

Posted by Maggie @ Maggie’s Notebook


  • Word

    The sad part about Buffet is that he can invest in anything and the minute he does all the people who do puts and calls can make a fortune. Investing 5 billion in BA will cause the stock to rise……Those cronies who are his buddies know in advance hes going to buy BA……they buy a put and voille…….

    They make a ton of money…in essence they are betting BA stock will rise and if Buffet puts 5 billion into BA stock you can bet the stock will rise making all his buddies tons of money.

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  • Somehow the conservatives need to separate themslves out from the Corporate Greed of these types, with the mom and pop businesses which keep America ticking.

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