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Buffett on CIT and the "Cheaper" Money

Buffett on CIT’s recent troubles:

(Via Calculated Risk)

CIT pays 13% plus gargantuan fees of 5% or so to get rescue funding, and they had to put up 5x worth collateral. Buffett makes the point that they can’t compete in a world where the government guarantees debt of banks who can thus borrow at 1% or so, even cheaper than Buffett himself. The “raw material” of the business is money, and if some banks can get it cheaper than the rest, they will win.

Isn’t this socialism? Some banks get to borrow cheap because the government backs their debt. No one else can compete because these buggers get the cheapest money. The biggest will survive, because now anything is too big to fail.

America is seeming more and more like India.

  • Anonymous says:

    >Why is it seeming more and more like India? Its by far worse. India had this philosophy of regulated capitalism (mixed economy) since Nehru and we continue to progress on these policcy decisions. Corruption is organized, like retail. US is run by money, democracy is heavily skewed in favour of capital. Did you read about the UBS guys caught with billions worth of bonds?

    Talk about organized retail – lol, this is organized corruption 🙂

  • Deepak Shenoy says:

    >Touche! (okay I need the accent on the "e", too lazy)

  • maurya says:

    >America capitalism is a eye opener for me. In India at least, high level regulators and government able to control lot of things. Wall street biggies literally owns US Politicians, regulators and Fed.