Insight on why institutions are letting their chief officers walk away with millions even after help from the government and taxpayers, with Warren Buffett, Berskshire Hathaway chairman/CEO, who says officers of failed institutions should not walk away rich.
Video and transcript below:
Prescience Partners returned 6.75% for the second quarter, underperforming the S&P 500's 8.55% return but coming out ahead of the Barclay Equity Long/ Short Index's 2.62% return. However, for the first six months of the year, Prescience is up 30.66%, doubling the S&P's 15.25% return and smashing the Barclay Equity Long/ Short Index's 9.27% return. Read More
let’s get back to becky in omaha with the oracle of omaha. we’ve been asking for your questions coming into the squawk e-mail box and coming to the squawk twitter feed which i’m still trying to learn. warren, we did get questions that have been coming in through the weekend on that. i i wouldn’t to briant to bring y comes from sky walker. why do mf global events continue to happen? are the penalties too light for the officers and dprektors? yeah, the penalties are too light. they’ll always happen. as long as human beings run institutions, including financial institutions, there will be people to take on due risk. there will be people with good steal. there are people that don’t understand the risk they’re taking. it’s just the nature of business. that happens with small businesses. it happens with big businesses. there should be — and i’ve written — i put this in an annual report. there should be much more extreme penalties for the ceos of the did he parting ceos of companies that are important enough to require society to intervene. the idea that huge institutions fail and taxpayers have to rush in and royal markets and all that sort of thing and then the ceo’s walk away rich is, i think — i think it’s a terrible thing morally. beyond that, i think it encourages bad behavior. you can’t worry — the moral risk doesn’t come about with the shareholders of you name the institutions whether it’s wamu or wachovia. the shareholders get creamed. the managers walk away rich. and there should be strong changes made in my view. i don’t think anybody that runs an institution that needs government to intervene later on for society’s sake, i don’t think any of them should walk away with a dime. with the case of mf global in particular, is this entirely jon corzine’s fault? i don’t know. somebody made a big bet. if you have an institution that has a net worth of a billion and someone adds in furniture and fixtures, i looked up their 10-k, and you take a position of $6 billion so that and a credit that could run into big trouble, especial certainly that’s a risk that shouldn’t be taken. why didn’t the new york federal reserve bank stop them? this was a primary broker. why weren’t the regulators more on top of this after what we went through in 2008? in some extent, they’re making the same mistake about sovereign debt. sovereign debt is pretty generally regarded as risk free. and that’s why the european banks motored up on it. they didn’t have to account capital requirements. and sovereign debt still represents a promise to pay. if you have a promise to pay by somebody that doesn’t have a printing press, you know, you can have problems. and when you have a printing press, don’t give it up, becky. but if you don’t have one, be careful about how much money you borrow. and the regulators in my view were very lax in terms of just regarding all sovereign debt as terrific. even when the spread started widening out. andrew, i know you have questions on this. think i we’re coming up against hard break. and i think we’ve got that top of the hour ahead. i know we have a lot more to talk about with this, too. plus, today is the day, warren that, you’ve got to file your sec filings to talk about what you’ve been buying. i know you bought about $7 billion worth of equities last quarter. we’re going to ask you about that when we come back, too. it will be an interesting answer. we’ll have a little quiz for joe and andrew.