Tags: Buffett | obama | wolinsky | Credibility

Buffett Losing Credibility by Being Obama's Buddy

By Jacob Wolinsky   |   Thursday, 22 Sep 2011 08:28 AM

In 2010, Warren Buffett’s Berkshire Hathaway was rated the most respected company in the United States, according to Harris Interactive.

Buffett’s Berkshire even beat out well respected companies like Steve Jobs’ Apple.

Buffett has made two catastrophic mistakes lately that will ruin his reputation.

The mistakes are both related, in a sense.

The first mistake was Buffett’s investment in Bank of America. While the investment might turn out to be a great one, especially since BAC is too big to fail. Buffett was criticized in the past for investing in companies like General Electric and Goldman Sachs, which later required a huge government bailout.

However the story with BAC is much worse: Buffett announced very shortly before his $5 billion investment in BAC that he would be hosting a fundraiser with President Barack Obama.

This clearly made the investment look political, because despite the government not holding a stake in the company, President Obama took swift action. After the fundraiser was announced, Obama managed to get New York Attorney General Eric Schneiderman kicked off the state task force, which is currently investigating mortgage foreclosure abuses. This was a lifesaver for BAC, since the bank has $1 trillion pile of problem home mortgages according to Reuters.

The second Buffett fiasco was his call for the “millionaire's” tax. Obama quickly seized on the language and announced plans to implement the “Buffett tax” on all millionaires. This would not be a fault of Buffett; however.

The Wall Street Journal reported that Buffett gave the president explicit permission to use his name in Obama’s crusade against the rich.

Obama is playing populist politics, but there is a big chance of a backlash.

First, Buffett — despite his liberal views — is widely respected by the American people, who are mostly center-right. However, his calls for taxes are very divisive, and have even been criticized by Leon Cooperman, a successful $6 billion hedge fund manager, who donated money to Obama’s election campaign in 2008.

Second, the tax will produce little revenue. Obama’s new “Buffett tax” would raise about $37 billion to $66 billion. This is less than 5 percent of the budget deficit in 2009. If the tax is enacted, the American people will not only see the detrimental effect of less hiring, but also the continuing ballooning deficits despite milking the rich for every penny.

President Obama currently seems to have “The Sidam Touch.”

If Warren Buffett wants to retain the respect of the American people he should stop himself from being Obama’s “spokesman,” and cancel the upcoming fundraiser.

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