While many complain about taxpayers’ burden in bailing out banks, investment legend Warren Buffett points out that so far, taxpayers haven’t paid a cent.
“The taxpayer literally hasn’t bailed out anybody,” he told BBC. “We haven’t had a tax increase in the United States.”
So who’s paying for the bailout if not taxpayers?
“The lenders to the U.S. government have been bailing them out,” Buffett says. It’s really the Chinese, Japanese, and other foreigners buying Treasury bonds who have financed the bailout, he says.
Buffett’s also not too worried about the moral hazard issue. Discussing Citigroup and AIG, he points out that the government may have bailed them out, but their stock prices fell 90 percent.
“I would say moral hazard is not a huge problem when the people on the equity side lost 90 percent of their money or in Freddie Mac and Fannie Mae more than 90 percent of their money.”
Buffett says the rich should give back both in taxes and philanthropy.
“They may think they did it all by themselves, but the society has done an awful lot for them,” he says. “So you ought to have a taxation system, but also a personal value system where a lot of that goes back to the people who got the short straws in life.”
Former Federal Reserve Chairman Paul Volcker disagrees with Buffett on moral hazard. He has criticized President Obama’s financial reforms for letting banks continue risky activity.
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