Clayton’s lending operation, though not damaged by the performance of its borrowers, is nevertheless threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee – banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella – have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.Things like this are why I think bailouts are evil.
This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.
Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.
- Current Mood: annoyed
My Nazi computer architecture lecturer ordered our laptops away again today so we could focus better. This made the lecture remarkably productive. Instead of being distracted by dozens of things all over the Internet, I was able to focus on a single task: catching up on Megatokyo on my iPhone.
- Current Location:United Kingdom, England, County of Kent
- 00:12 Yay, I finally cleared my support backlog. #
- 12:52 Rock Band pedal is breaking. Put in an order for one of these: www.pedalmetals.com/ #
- 13:54 On claims circulating in some circles: a promise must be made to be broken. None were made, despite my offer to; Q.E.D., none were broken. #
- 01:40 @37signals 542. #
- 08:51 @Skorpychan Yes, I too much prefer being stabbed silently in a London alley to being shot with a weapon that can be heard miles away. #
- 11:47 I'm going to be moving most of my public-friendly tweets to @architechies and locking this one down tight, so please adjust your follows. #
- 13:56 Second lecture today was canceled. Oh well, at least I attended one this week. #
- 15:39 Yum, chicken tikka. #
- 15:41 @OvidPerl My parents forward my California ballot to me when there's an election during term time. Felt very strange during the primary. #
- 16:59 For the love of god, why Accessorize?!? #
- 21:22 Won't Get Fooled Again, medium, 100%. Was playing with a full band--lots of high fives. #