More on Buffett

Submitted by David Larsson on Wed, 05/05/2010 - 18:35

Excellent piece "The Hole in the Buffett Defense" today by James B. Stewart

Warren Buffett may understand the complex derivative at the heart of the fraud suit against Goldman Sachs... “better than most,” as he put it this past weekend, but I’m not sure he understands the securities laws or the legal definition of fraud.

Exactly. As noted in my post from Monday, "Mr. Buffett may live to regret [his] words, particularly if the SEC can prove" the fraud claim in paragraphs 44 - 51 of its complaint.

Mr. Stewart (whom I've been reading regularly since he began writing for American Lawyer magazine back in the Dark Ages when I was attending law school) adds an ominous ending:

Compounding the uncertainty is The Wall Street Journal’s revelation last week that Goldman is under criminal investigation ... It seems unlikely that the allegations in the SEC’s civil case would be the focus of the Justice Department’s inquiry. Ordinarily, the SEC defers to the Justice Department and lets criminal matters be resolved first. That suggests that something else is under scrutiny.

I don't really wish ill fortune upon Goldman Sachs (at least not in my better moments). I hope that it turns out that there was no fraudulent behavior, and, even if it turns out that there was, then I'm sure that Goldman Sachs has not cornered the market in questionable behavior. But I do think that we must disenthrall ourselves from the ideological conviction that the Invisible Hand of the Marketplace will magically make all fraudulent behavior disappear from our financial markets. To the contrary, and to borrow another phrase from President Lincoln, I believe our financial system cannot endure, permanently half fraudulent and half real. "It will become all one thing or all the other."

David Larsson's blog

Quotations

More on Buffett

Tags